Crypto trading app provider Coinseed announced Tuesday that it is shutting down following a recent lawsuit by the New York State Attorney General (NYAG) Letitia James.
In February, James accused Coinseed and its executives of defrauding investors of more than $1 million and breaking U.S. registration laws. Later in May, the NYAG filed a court motion to freeze Coinseed’s trading activity and halt all its operations. Finally, on Monday, the NYAG secured a court order to block Coinseed’s activities and put in place a receiver to ensure the protection of investors’ money going forward.
Delgerdalai Davaasambuu, CEO of Coinseed and a defendant in the case, said it is "immensely mournful and frustrating to shut down the business." He maintains no wrongdoing and says Coinseed made a "fatal mistake" by living in New York until 2019.
Coinseed was founded in 2017 and raised $1 million via an initial coin offering (ICO) in 2018. According to the NYAG, Coinseed conducted an unregistered securities offering in the form of the ICO by issuing its CSD token and never registered to trade any cryptocurrency within or from the New York state.
Davaasambuu says Coinseed raised the ICO money from non-U.S. investors. "Our ICO excluded US investors and we’ve paid back more than twice the ICO amount to the ICO investors as rewards so far," he said, adding that there hasn’t been any, "not even a single one," complaint about its ICO or its token from investors.
More than 170 complaints
The NYAG says it has received more than 170 complaints from investors who were concerned about protecting their assets due to Coinseed’s allegedly fraudulent conduct.
It has appointed Michelle Gitlitz, the global head of Crowell & Moring LLP’s blockchain and digital assets practice, as a court-appointed receiver with special powers to safeguard investments already made on Coinseed.
The NYAG has also accused Coinseed of operating as an unregistered commodities broker-dealer. Davaasambuu says "it’s very laughable since no other cryptocurrency exchanges have become a registered broker-dealer." He says the only difference between Coinseed and other exchanges is that "they have enough money to fight in the court."
"We can’t spend millions of dollars in legal fights," he said.
As for user funds, they "will be returned soon and we’re interviewing law firms to hire for the matter," said Davaasambuu.
Davaasambuu has also created a free token called FLJ ("F*** Letita James") in frustration. "It’ll be listed on various DeFi platforms soon and will be available for trading," he said.
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