SEC, NYAG crack down on trading app Coinseed over ‘worthless tokens’

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Federal authorities have cracked down on a digital currency investment platform which they said defrauded investors by selling them worthless tokens. The New York Attorney General’s office and the Securities and Exchange Commission (SEC) filed separate charges against Coinseed and its top executives.

NYAG Letitia James took the legal action against Coinseed for allegedly defrauding $1 million from its users. In the NYAG lawsuit, which was filed at the Supreme Court of New York, James alleged that Coinseed has been defrauding its users since 2017. The firm, which operates a mobile application allowing users to trade digital currencies, sold its CSD tokens to investors. James described the tokens as a “worthless cryptocurrency” and an “unregistered security.”

CEO Delgerdalai Davaasambuu and CFO Sukhbat Lkhagvadorj are accused of making misleading and false statements to investors. They allegedly lied about the team behind Coinseed and their experience in the financial services industry, according to the SEC. Lkhagvadorj claimed to have been a Wall Street trader when he had never traded securities.

The two executives touted their firm to be the best in the market for tech-savvy digital currency investors. They also claimed the CSD token “was a great opportunity for young people who want to make money in the crypto market.” However, years later, no exchange has listed the token.

The two defendants didn’t register their company with the regulators, James added. They claimed that “they didn’t have that much time to pursue that kind of licenses.”

James wants the court to bar the two from conducting any business relating to securities and commodities. She also wants a receiver to wind down Coinseed’s operations and return all the funds it raised.

She remarked, “Unregulated and fraudulent virtual currency entities, no matter how big or small, will no longer be tolerated in New York. This lawsuit should send a clear message to all those trading cryptocurrencies that my office will work tirelessly to ensure transparency and fairness in the market and will not hesitate to protect investors’ wallets against all those who seek to defraud them.”

On its part, the SEC filed a similar lawsuit at the Southern District of New York against Coinseed and its CEO. The watchdog alleges that the company conducted an unregistered token sale. It, however, claimed the firm only raised $141,410.

Davaasambuu responded to the charges, saying he had not committed any crime. “I’m 100% sure that the suit is full of false accusations. It’s very strange that they’re blaming the very nature of how a startup works,” he stated in an email.

Davaasambuu said he is considering moving from his home in Long Island City, New York, back to Mongolia.

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