New York Regulator Strengthens Anti-Fraud Unit to Curb Crypto-Related Crime

Post FTX Saga: New York Banking Regulator Rolls Out New Crypto Guidelines

The New York State Department of Financial Services (DFS) has stepped up efforts to detect fraud and other illegal activities among entities engaged in cryptocurrencies and other virtual currencies, as a government clampdown on the sector widens.

As per a Feb 21 announcement, the latest efforts saw new tools aimed at detecting activities such as Insider trading and market manipulation perpetrated by New York-regulated virtual currency service providers introduced.

“The new enhancements will provide the Department with additional capabilities to detect potential insider trading, market manipulation, and front-running activity associated with Department-regulated entities and applicants’ exposure or potential exposure to listed virtual currency wallet addresses,” read the announcement. 

Commenting in a statement, DFS Superintendent Adrienne A. Harris described the new tools as a significant step in the unit’s supervision of the virtual currency industry noting that it would also help them in keeping pace with the fast-evolving industry.  

“These tools will help us combat financial crime and fraud, hold regulated entities accountable, and further strengthen our national leadership in virtual currency supervision,” said Harris.


Despite the U.S. Congress falling back in rolling out a comprehensive virtual currency regulation, New York regulators have continued to take action against bad players in the crypto industry through state-specific guidelines. 

In December, the DFS, which is the department responsible for regulating New York-regulated financial services and products entities issued guidelines requiring banks to submit business plans before entering into partnerships with digital asset firms. 

Last month, the regulator released new consumer protection guidelines in the event of virtual currency insolvency. To avoid FTX and Terra-like situations, the guidance reiterated expectations for sound custody and disclosure practices and “the paramount importance of the equitable and beneficial interest in the asset always remaining with the customer.”

Last week, the DFS ordered Paxos to cease minting the Binance USD stablecoin citing “several unresolved issues related to Paxos’ oversight of its relationship with Binance” regarding Paxos-issued BUSD. 

On Feb 22, New York Attorney General Letitia James sued cryptocurrency exchange COINEX for operating in the state without registration. Announcing the move, the AG’s office wrote that “the Office of the Attorney General (OAG) was able to buy and sell cryptocurrencies on CoinEx in New York, although the company is unregistered in the state”, which was a violation of the state,’s securities act, the Matin Act.