New York’s attorney general filed a lawsuit on Wednesday to shut down the cryptocurrency platform Coinseed Inc for allegedly defrauding thousands of investors, including by charging hidden trading fees and selling “worthless” digital tokens.
Attorney General Letitia James said Coinseed traded cryptocurrencies such as bitcoin without registering as a broker-dealer, and sold “CSD” tokens without authorization to raise money for its mobile application startup.
James also sued Coinseed Chief Executive Delgerdalai Davaasambuu and Chief Financial Officer Sukhbat Lkhagvadorj, saying they overstated the midtown Manhattan-based company’s management experience, while Lkhagvadorj misrepresented himself as a former Wall Street trader.
Coinseed’s fraud totaled more than $1 million, according to James, who is also seeking restitution for investors.
The U.S. Securities and Exchange Commission filed a related lawsuit against Coinseed and Davaasambuu over the tokens, which both regulators said were sold from December 2017 to May 2018.
Coinseed did not immediately respond to requests for comment. Both defendants have residences in Long Island City, New York, but Davaasambuu has expressed an intention to return to his native Mongolia, James said.
The attorney general said Coinseed had touted the CSD token as “a great opportunity for young people who want to make money in the crypto market,” and that the mobile app was “guaranteed” to help push its market value higher.
James’ lawsuit in Manhattan Supreme Court alleged violations of the Martin Act, a New York state securities law. The SEC’s lawsuit is in Manhattan federal court.