New York State Attorney General Letitia James has announced charges against Coinseed, a crypto investment platform, for allegedly defrauding investors out of more than $1 million.
The filing centers around an ICO for Coinseed’s CSD token, held in December 2017. The company allegedly raised over $100,000 through the sale of 200,000 of these CSD tokens. The NYAG claims the tokens had “no functionality” in the company’s mobile application, noting that these tokens were “not required to use the trading platform, or not manage one’s account.” The state has also said Coinsend traded crypto without registering as a broker-dealer.
“Attorney General James seeks to stop Coinseed and the two individual defendants from further operating as unregistered commodities broker-dealers through their mobile application, as well as return investments of Coinseed’s worthless cryptocurrency, the CSD token,” said a statement.
The SEC has also filed a related lawsuit against the company.
In court documents, the state claims Coinseed has repeatedly violated the Martin Act—a New York-specific anti-fraud law—and that the company “unlawfully sold unregistered securities in the form of a digital token, while making material misrepresentations about their management team.” Notably, James similarly invoked the Martin Act in the state’s lawsuit against crypto exchange Bitfinex and stablecoin issuer Tether, which remains ongoing.
Along with Coinseed, James has also filed suit against two of its executives: CEO Delgerdalai Davaasambu and CFO Sukhbat Lkhagvadorj.
The documents claim that Lkhagvadorj “misrepresented himself as a former Wall Street trader, when in truth he had never traded securities or commodities.”
Lawsuits surrounding fraudulent ICOs and tokens that may or may not actually be securities are nothing new for the crypto industry.
The most high-profile example may be the recent SEC case against Ripple Labs, whose token, XRP, has since precipitously fallen from grace: multiple exchanges have delisted it, and asset managers like Greyscale have removed it from their crypto funds.
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