New York State Attorney General Letitia James sued the crypto investment platform Coinseed Inc for allegedly defrauding thousands of investors by more than $ 1 million.
According to the attorney general, Coinseed and its CEO Delgerdalai Davaasambu and former CFO Sukhbat Lkhagvadorj, traded illegally, defrauding investors between 2017 and May 2018:
“Instead of selling shares, Coinseed sold digital tokens to raise funds to support its business growth. The defendants represented to investors that the money raised in the ICO would be used to ‘accelerate [Coinseed’s] global growth and expansion. ‘”
The allegations presented in court documents revolve around Coinseed’s violation of the Martin Act, a New York-based anti-fraud law. In the ICO of its CSD token, launched in December 2017, Coinseed raised more than $ 100,000 by selling 200,000 tokens.
The attorney general said that investors were misled about the potential to profit from the CSD Tokens, which were distributed by the defendants, even though they did not register as securities dealers.
“Investors were driven to expect profits solely from the Defendants’ efforts to establish, operate and expand the Coinseed mobile app. The defendants, however, were not registered as securities dealers with OAG, as required by the General Business Law, ”she said.
The complaint also accuses Coinseed executives of misleading clients about their professional experiences and misrepresenting information about the extent to which trading fees have been charged to investors.
The document also cites an online post published by Coinseed to attract investors to participate in its ICO:
“This is a great opportunity for young people who want to make money in the crypto market. Many of them will likely take advantage of the app as a stepping stone to greater investments in the virtual currency space. This will certainly play a role in increasing the value of the Coinseed token once it reaches the market. “
The complaint added: “In fact, almost three years later, the CSD token was not listed anywhere.”
However, Davaasambuu told Business Insider that he denies the charges and that Coinseed has not allowed U.S. users to participate in its ICO and has not accepted any New York users since 2018.
“I am 100% sure that the case is full of false accusations. Embarrassingly bad, ”he said.
The attorney general appears to have the intention of ending Coinseed’s operations, as he seeks an order to instruct defendants to pay the damages caused, return all amounts obtained, pay refunds to investors and for them to be permanently prevented from trading with securities securities and commodities in New York.
Letitia James is accustomed to invoking the Martin Act on crypto-based ventures, as she is currently involved in the ongoing lawsuit against Bitfinex crypto exchange and the stablecoin issuer Tether. Cases against cryptocurrencies for being unlicensed securities are also the fashion of the month, as seen in the recent SEC case against Ripple Labs and its XRP token.