NY AG sues to shut down crypto app Coinseed alleging it sells a worthless currency and defrauded investors
New York's attorney general alleges that Coinseed wasn't registered to trade cryptocurrencies like bitcoin or sell its own digital coin.
New York Attorney General Letitia James announced on Wednesday her office has sued to shut down Coinseed, a cryptocurrency-trading app that prosecutors allege ignored securities laws and defrauded thousands of investors.
The lawsuit alleges that Coinseed and its two top executives, CEO Delgerdalai Davaasambuu and CFO Sukhbat Lkhagvadorj, "were unlawfully trading cryptocurrencies, like Bitcoin, without being a registered broker-dealer in New York," according to a Wednesday press release.
James said in the filing that Coinseed sold its own cryptocurrency, the CSD token, to fund its trading platform, but that the company wasn't registered legally to do so. That rendered the currency "worthless," James' office said.
In soliciting investors for their initial coin offering — the equivalent of an initial public offering but for digital currency — Coinseed's two top executives lied about their professional experience, James said. Despite having "little financial services experience," Lkhagvadorj "misrepresented himself as a former Wall Street trader," according to the filing.
The lawsuit also alleges that Coinseed added on extra undisclosed fees to trades, while advertising itself as a low-fee platform.
Davaasambuu told Insider he denies the allegations and takes issue with several of the attorney general's charges. He said Coinseed left New York in 2019 and has not accepted users from the state since 2018.
"I'm 100% sure that the suit is full of false accusations. Embarrassingly bad," he said in an email.
According to Davaasambuu, Coinseed didn't allow any US investors to participate in its ICO, hasn't received any complaints from investors, and has paid out dividends to coin holders since 2018.
He also claimed that no cryptocurrency exchange has licensed commodities broker-dealers, and that "they're trying to make us an example" to force all cryptocurrency firms to have licensed brokers. He denied the allegation that Coinseed tacked on extra fees.
James said she is seeking restitution for the thousands of Coinseed investors that she said were defrauded out of more than $1 million. She also seeks to bar Coinseed and its executives from "participating in any future securities offerings or as commodities broker-dealers," according to the press release.
"For over three years, Coinseed and its executives flagrantly and illegally violated New York state laws, but the corporate greed perpetrated by Coinseed while committing fraud against thousands of investors ends now," James said in a statement.
This matter was investigated in parallel with the US Securities and Exchange Commission, which, today, filed a similar but separate action against Coinseed, according to James' announcement.