NYAG asks court to stop spare change app Coinseed from trading user funds

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The New York Attorney General (NYAG) has asked the court to stop an alleged fraudulent digital currency startup from continuing with its operations. The AG is accusing Coinseed, a spare change and digital currency trading startup, of allegedly selling worthless tokens to investors earlier this year. However, despite the ongoing lawsuit, the company has allegedly continued to conduct unauthorized trades with user funds.

Coinseed allows its users to purchase digital currencies with their spare change when making online purchases. It also allows users to make recurring digital currency purchases as well as one-time investments. However, the startup caught the attention of the U.S. authorities after issuing its CSD tokens to thousands of investors.

According to Letitia James, the New York Attorney General, the token was a “worthless cryptocurrency and an unregistered security.”

The NYAG launched a lawsuit against the company in February, coinciding with similar charges brought by the U.S. Securities and Exchange Commission (SEC) against Coinseed. Now, the NYAG has gone to court again, claiming that Coinseed has continued to conduct illegal activities despite the lawsuit.

Despite our lawsuit, @coinseedapp has continued to hold investors' funds hostage, conduct unauthorized trades, and move virtual currency to an offshore trading platform.

I'm taking action to immediately halt the illegal operations of @coinseedapp as our lawsuit continues. https://t.co/ItfYTzv7Zi

— NY AG James (@NewYorkStateAG) May 7, 2021

In the lawsuit, the office of the Attorney General outlined, “Since OAG filed the Complaint in this action, Defendants’ unlawful conduct has continued. Following the Complaint, Defendants have made unauthorized trades, putting all investors’ holdings into virtual currencies that at the time were declining in value, and have prevented the victims from withdrawing any of their funds.”

James further alleges that in the months leading up to her office’s complaint against Coinseed, the company drained bank and digital currency accounts that held users’ deposits and moved them to overseas accounts.

“To locate and safeguard investor assets, as well as to protect investors from further harm, OAG is seeking a TRO, a preliminary injunction, and the appointment of a receiver,” the lawsuit stated.

Since filing the initial lawsuit against Coinseed in February, the AG’s office has received complaints from 130 investors who have lost access to funds held by Coinseed. Some of these investors had portfolios exceeding $150,000, the AG said.

James further accuses Coinseed of converting all the investors’ funds into Dogecoin, a meme digital currency that has taken off in recent months.

The AG is asking for a court order to appoint a receiver for the funds derived by Coinseed fraudulently. She also wants the court to order the company to issue the receiver with all their books of accounts. In addition, she wants a temporary restraining order against Coinseed to halt the offering or selling of securities, cease all trading and preserve all fiat and digital currencies.

James has continued to crack down on fraudulent digital currency projects in New York. As CoinGeek reported in early March, she issued a stern warning against rogue digital currency companies, telling them to “play by the rules or shut down.”

See also: CoinGeek Live panel on Regulation of Digital Assets & Digital Asset Businesses