Cryptsy Lying About Following All State Laws

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The cryptocurrency exchange Cryptsy has long stated that it complies with all laws and regulations regarding the operations of the exchange. The bottom of each page of the exchange displays an MSB registration number and the terms of service discuss the fact they are an MSB license holder. The company falls under FinCen guidelines for money service businesses in addition to state-level guidelines, regulations, and laws for the states in which it operates.

Footer of Cryptsy website

Footer of Cryptsy website

Cryptsy has long stated publicly via multiple avenues that the company is fully compliant with all applicable laws regarding the exchanging of money. A Coin Fire investigation has found that while Cryptsy is fully registered with FinCen to operate a money service business, they lack the appropriate registrations and ability to operate legally in the majority of US states. The MSB registration number 31000061019575 returns to Project Investor Inc., which is doing business as Cryptsy.

Cryptsy FinCen Registration

Cryptsy FinCen Registration

The DelRay Beach Florida company did not respond to repeated Coin Fire requests for applicable state license numbers, nor did they respond to multiple attempts for comment. As part of the investigation, Coin Fire’s research team began looking at Project Investor Inc’s status in several states to determine where they were appropriately licensed to operate as a money service business. We also spoke with Adam Atlas, an attorney who specializes in legal services for money service businesses and virtual currency companies for further information regarding state licenses and registrations in the United States.

Mr. Adam Atlas, Esquire

Mr. Adam Atlas, Esquire

Mr. Atlas leads the firm Adam Atlas Attorney at Law. Mr. Atlas holds a Bachelor of Civil Law, Bachelor of Common Law, and a Bachelor of Arts in Political Science with Honors, all from McGill University, which included a year on exchange at the National University of Singapore. Atlas has been a member of the Bar of the State of New York and Bar of the Province of Quebec since 1998. His firm generated some of the published guidance on virtual currency for FinCen. Exchanges such as Cryptsy are required to obtain an MSB registration with FinCen, and then register and be provided licenses for individual states and territories before doing business. While the FinCen registration is relatively simple for a company to secure, many states require a license for this type of business. Not having those licenses while offering services to customers in those states can come with serious consequences. Mr. Atlas told Coin Fire that,

“When you are a potential MSB you have to ask if you are an MSB under federal law and also ask the question under each and every state banking law. There is a handful of states such as Montana that do not have MSB license requirements.” Only registering with FinCen doesn’t suddenly make a company legal to operate in all states and territories with Mr. Atlas telling us, “The short answer is no but the long answer is that in the handful of states that do not regulate MSBs or VCBs you can start operating.”

Simply opening up shop on the Internet without the appropriate licenses in many states may result in far-reaching consequences.

Mr. Atlas said, “If you are determined to have operated a money service business without the necessary license applicable under the state law you are exposed to civil and potential criminal penalties under both the state law and by ricochet under Federal Law because the US code says that it is a federal offense to be breach of the state law”.

Screenshot 2015-05-01 16.52.01

Virginia MSB List

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States that do not require a license to operate as an MSB or VCB, such as Montana, were not included in the Coin Fire license search. In every case where the state or territory responded to our inquiry, we were told that Project Investors and Crypsty are not authorized for operations in the territory or state under either name. The lack of licenses in each state or territory flies directly in the face of Cryptsy statements that the company is fully compliant with all applicable laws and regulations for operating as an exchange in the United States. [table id=9 /]

Note: Atlas has not researched Cryptsy to see which licenses it has and does not have and did not offer an opinion on its specific compliance with federal or state law specifically.

Coin Fire

Coin Fire is a cryptocurrency news site started on June 6th of 2014. The site focused on hard-hitting investigative stories. Coin Fire was acquired by 99Bitcoins on October 2015.

10 Comments

  1. Your_worst_Enemy_cryptsy on

    Big Vern has always been full of caca.
    He lies at every turn.
    I would never, personally or business wise, believe a damned thing BIG VERN has to say.
    Use your real name, dickhead. I would be willing to bet your firm, you weren’t named BIG VERN at birth, dipshit.
    started sending out spam, too, to lie to you more about his venure into a mining site called mintsy.
    what is BIG VERN trying to do be cutsy?

    Hell, I signed up, right at the first.
    I NEVER got my confirmation emails, and after sending, oh about 100, emails, I never got an answer.

    BIG VERN!!!!!!!!!!

    Big vern, is #1, stupid, #2 a liar, #2 a cheater, #3, a thief.

    Look at the list BIG VERN, how many states say you are NOT allowed to do business?
    how about 99%.
    Now, come back and lie ome more and tell us this article lied or was based on bullshit.

    You are the only one I know who bases his every day life, on bullshit.

    • First off. Paul vernon. He never tried to hide that

      Second off. If you didnt sign up for info from mintsy we would never email you….
      Mintsy is a real cloud mining service with verifiable hashrate.

      Your email provider likely marked it as spam. Yahoo is the worst with this. We reccomend gmail

      I dont even know why im responding to this…..

  2. There is way too much irresponsible reporting going on in the industry. All it would have taken to get the facts straight here would have been an email or phone call. We tend to rely on reporters as an accurate source of information and every time this happens that credibility looses a big bit of it’s influence. If you are a reporter or write op-eds or other articles about the crypto industry, please, get the facts before you publish, not later, it only hurts us all when you don;’t.

  3. Well on the bright side people CEX.IO has an MSB and is also compliant at the State Level with a few states in the US. So far they still need to work on Alabama, Alaska, Arizona, Arkansas, Colorado, Florida, Georgia, Guam, Idaho, Iowa, Kansas, Louisiana, Maryland, Michigan, Mississippi, Nebraska, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Tennessee, Texas, U.S. Virgin Islands, Vermont, Virginia, Washington. So at least there is work being done by exchanges to become compliant at state levels.

  4. Not really sure what coinfires angle is here outside of just causing trouble for Cryptsy.
    Hey Coinfire, how about trying to uncover and expose real scams in the btc ecosystem.

    Yes, Crytpsy is easy hate and it’s become cool to target them but this isn’t journalism.

    Big Vern, if you are following this thread how about getting things in order over there in regards to losing the dead or shit coins and fixing or adding legit ones. AeroMe comes to mind. The name hasn’t been Aero in months and the swap has ended and yet Cryptsy still hasn’t changed the name & wallet and continues to allow trading of the worthless preswap coin.

  5. In response to coinfire

    I’d like to make a statement regarding coinfire’s article claiming we are lying about being fully licensed.

    First off, we’ve never made any claims about being fully licensed at the state level. I’m unsure where they received their information from, but like every other Bitcoin company in the US, we do not have state level MSB licenses. Are we working to acquire them? Yes, but the process can take years.

    There is no company that is fully licensed at the state level in the US. None.

    Coinfire claims to have tried contacting us, but I’m unsure the method they were attempting. I’ve not seen anything from them requesting information. Had they asked, we would have told them that we do not have state level licenses – just like anybody else who asks that question. They certainly would not have had to call state by state requesting information because we would have told them we do not carry state licenses.

    We do, however, fully comply with our Federal MSB requirements. This includes filing SAR (Suspicous Activity Reports) and CTR (Currency Transaction Reports). We also have one of the most extensive KYC programs in the industry, scrub accounts against the OFAC list, and perform Transaction Monitoring. At a federal level, we are compliant.

    Federal compliance is the only claim we have ever made and will make.

    I invite the writer at coinfire to contact me so I can show him what we do have, and what we don’t. I’m sure we could chat for hours about the woes of a Bitcoin related company attempting to get licenses from all the states.

    It seemed to be a good investigation, but it was based on a false premise.

    Paul Vernon
    “BigVern”

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