New York State Attorney Letitia James has filed a lawsuit against crypto investment platform Coinseed Inc. for allegedly defrauding thousands of investors out of more than $ 1 million.
According to the Attorney General, Coinseed, CEO Delgerdalai Davaasambu and former Chief Financial Officer Sukhbat Lkhagvadorj were both illegally traded, defrauding investors between 2017 and May 2018:
“Instead of selling shares, Coinseed sold digital tokens to raise money to support the growth of its business. The defendants provided investors that the money raised in the ICO will be used for” expediting. ” [Coinseed’s] Global growth and expansion. “
The allegations in court documents center that Coinseed has violated Martin Act, New York’s anti-fraud law. In their CSD token ICO launched in December 2017, Coinseed raised more than $ 100,000 by selling 200,000 tokens.
The prosecutor stated that investors were misled about the potential to profit from the CSD coins, which the defendants distributed despite their failure to register as securities dealers.
“Investors were only expecting profits from the defendants’ efforts to create, operate, and expand the Coinseed mobile app. However, the defendants were not registered as securities dealers with OAG as required by general business law.
The complaint also accuses Coinseed executives of misleading clients about their professional backgrounds and misrepresenting information about how much trading fees are paid to investors.
The document also refers to an online publication Coinseed published to attract investors to participate in the ICO:
“This is a great opportunity for young people who want to make money in the cryptocurrency market. Many of them are likely to benefit from the app as a starting point for larger investments in the virtual currency space. This is guaranteed to play a role in raising the value of Coinseed once it hits the market.”
The complaint added: “In fact, nearly three years later, the CSD code wasn’t listed anywhere.”
However, Davaasambuu told Business Insider that he denies the allegations and that Coinseed has not allowed US users to participate in its ICO and has not accepted any users from New York since 2018.
“I am 100% sure the lawsuit is full of false accusations. It’s embarrassingly bad,” he said.
The Attorney General appears intent on shutting down Coinseed’s operations, as it seeks an order to direct the defendants to pay the damages they caused, cancel all sums obtained, pay compensation to investors, and permanently ban them from dealing with securities and commodities in New York.
It’s no surprise that Letitia James has invoked Martin’s law on crypto-based ventures, as she is currently involved in the ongoing lawsuit against Bitfinex cryptocurrency exchange and stablecoin source Tether. Cases against cryptocurrencies for being unlicensed securities are also the flavor of the month, as seen in the recent SEC case against Ripple Labs and its XRP token.