Crypto-trading platform Coinseed will close down after being sued by New York for selling ‘worthless’ tokens and moving investor money without permission

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New York State Attorney General Letitia James during a news conference in New York on May 21, 2021.

Cryptocurrency trading platform Coinseed is shutting down after being sued by New York Attorney General Letitia James earlier this year for fraud.

“I’m announcing that I am winding down the business due to a lawsuit from the NYAG,” Del Davaasambuu, Coinseed cofounder and CEO, said in a statement found on the landing page of the company website.

The saga began on February 17 when James filed a lawsuit against the company for defrauding investors out of more than $1 million via undisclosed fees and through the sale of “worthless” CSD tokens, Coinseed’s cryptocurrency.

On May 6, James took legal action to halt operations of Coinseed, alleging that the company allocated investors’ money into dogecoin without permission.

According to a filing, Coinseed on April 16 converted all investor assets into bitcoin “without notice or authorization” and disabled all functionality in the application so that they will not be able to withdraw their money. Later on the same day, Coinseed traded the bitcoins for dogecoin.

The office of the AG said it received more than 170 complaints from investors who were concerned about protecting their assets in the first three months after filing the lawsuit.

Then on June 7, the office of the attorney general secured a court order to halt what it called the illegal and fraudulent operations of Coinseed.

“When platforms operating illegally in New York seek to trade on investors’ money, we will use every tool at our disposal to stop their unlawful actions,” James said in a statement.

But Davaasambuu maintains his company did nothing wrong.

“There are still no regulations about how to classify cryptocurrencies and what kind of licenses they should obtain to run a business in the US,” he said in a post on the company’s website. “We don’t even have a clear guidance on how to pay crypto-related taxes.”

He added that after their initial coin offering in 2017, James and her office were “constantly harassing” them.

“We couldn’t even list our token in other exchanges because of their constant pressures and bullying,” he said. “Coinseed is a small startup with little money and we couldn’t hire good lawyers to fight them in the court which would cost millions of dollars.”

The CEO called James a “business-abuser” who chased after him and his company until all his team members left. Davaasambuu also blamed the series of events for the breakdown in his mental health.

Davaasambuu added that user funds will be returned soon once they hire a team of lawyers. Coinseed’s payment providers terminated their account in February, he said, due to the lawsuit.

He also said that the “fatal” mistake he made since founding his company in 2017 was living in New York.

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A crypto-trading platform being sued for fraud by New York stands accused of moving all of its clients’ assets into dogecoin without telling them

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Dogecoin was started as a joke in 2013.

  • The New York state attorney general this month took legal action to immediately halt the continued illegal and fraudulent operations of Coinseed.
  • The sate AG alleges Coinseed moved investors’ money into dogecoin without permission.
  • Over 130 complaints from investors have that reinforce the allegation have poured into the NYAG office.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell

New York Attorney General Letitia James on May 6 took legal action to halt operations of cryptocurrency trading platform Coinseed.

The state AG alleges that Coinseed allocated investors’ money into dogecoin without permission.

Per the filing first viewed by Bloomberg, Coinseed on April 16 converted all investor assets into bitcoin “without notice or authorization” and disabled all functionality in the application, so that they will not be able to withdraw their money.

In the evening of the same day, Coinseed traded the bitcoins for dogecoin, described as “an extremely volatile virtual currency” in the filing, and which at that time was experiencing a sharp selloff.

“[The Office of Attorney General] has received dozens of complaints from investors describing that [Coinseed] conducted these unauthorized trades and transferred all investor assets into dogecoin,” the filing said.

An example of an investor complaint on April 17 was included. The investor alleged that Coinseed transferred all his cryptocurrency to dogecoin without his permission and blocked his ability to withdraw his money. From a $20,000 balance the night before, he said the transfer to dogecoin immediately dropped his balance to $7,000.

Four other complaints followed a similar narrative.

“Unregulated and fraudulent virtual currency trading platforms have no place in New York,” the Attorney General said in a statement.

She continued: “Three months ago, we filed this case against Coinseed and its executives alleging that they violated New York state laws and illegally squandered investors’ monies. However, in the months since we filed our suit, the greed perpetrated by Coinseed and its CEO has not only continued but grown.”

In February, the office of James filed a lawsuit against Coinseed and its two top executives.

At that time, James accused Coinseed of defrauding investors out of more than $1 million via undisclosed fees and through the sale of “worthless” CSD tokens. CSD tokens were Coinseed’s own cryptocurrency.

But in the last month, dogecoin has had a stellar performance. It is up more than 70% since the middle of April and is now the fifth-largest cryptocurrency by market capitalization according to CoinGecko. It may also be enjoying institutional backing soon.

Tesla chief executive Elon Musk tweeted a poll Tuesday asking if his followers want Tesla to accept the cryptocurrency as payment.

Still, James has alleged in her filing that Coinseed has “drained both bank and virtual currency accounts that held investor deposits and moved investor assets overseas.”

The AG said that in the nearly three months since James filed her lawsuit, they received over 130 complaints from investors regarding Coinseed’s conduct.

The Office has therefore asked the court to issue a temporary restraining order and a preliminary injunction. They have also asked the court to appoint a receiver to oversee all assets in an effort to safeguard investments as the lawsuit proceeds.

Coinseed CEO Delger Davaasambuu, however, told The Block that the complaints were “full of false accusations.” The CEO maintained that Coinseed left New York in 2019 and has not accepted any users from New York since 2018.

As the meme cryptocurrency with the Shiba Inu as its mascot skyrocketed an astronomical 10,000% year-to-date, more and more people are jumping in.

A report published by the blockchain intelligence provider TRM Labs on Monday detailed how fraudsters manipulated Musk’s dogecoin promotion during his anticipated hosting of the iconic Saturday Night Live Show on May 8 and pocketed dogecoin worth $5 million.

Read the original article on Business Insider