A cryptocurrency trading company in New York called Coinseed is shutting down permanently after being investigated for suspected fraudulent investment activity by the state attorney general’s office.
Attorney General Letitia James ‘multi-year investigation ultimately resulted in a lawsuit filed in February, in which James’ office accused Coinseed of trading cryptocurrencies through its app without being registered as a broker in New York. James’ office alleged on Monday that Coinseed continued to trade cryptocurrencies after the complaint was filed and that it was even trading on investor accounts without their knowledge.
“When platforms operating illegally in New York seek to trade in investor money, we will use whatever tools we have to stop their illegal actions,” James said in a statement Monday. “We will not allow dishonest traders to hold innocent investors’ funds hostage while they deplete their accounts and transfer virtual currency to an unregulated offshore trading platform.”
Coinseed CEO Delgerdalai Davaasambuu confirmed the shutdown this week in an angry statement posted on the company’s website. Davaasambuu said in the statement that James’s office has deliberately harassed his business for years and that the broker’s claim was a hollow excuse to go after his trading platform. Davaasambuu noted that some other cryptocurrency trading companies are also not registered as brokers in New York.
Investigators in James’s office didn’t target these other platforms and chose Coinseed because “they know they can bully us because we can’t spend millions of dollars on legal fights,” Davaasambuu said. .
Coinseed is the second crypto trading company New York has forced to close. Bitfinex and Tether closed in February after paying $ 18.5 million in penalties. James’ office said the companies lied when they told investors that the currency called stablecoins they were selling was backed by a U.S. dollar. Bitfinex and Tether paid the settlement but did not admit any wrongdoing.
As part of the lawsuit against Coinseed, New York prosecutors said the company launched an initial coin offering – or ICO – in 2017 that allowed investors to buy CSD, or Coinseed, tokens and use them to invest in cryptocurrencies through its app. An ICO is essentially the crypto version of an Initial Public Offering, or IPO.
Under New York law, this ICO was considered the company selling the securities and Coinseed should have registered as a broker, prosecutors argued. Davaasambuu and other Coinseed officials did not register and instead let their platform grow to 4,000 to 5,000 active investors with around $ 50,000 in daily trades, the lawsuit says.
State prosecutors also accused Davaasambuu of lying about his expertise and work experience in marketing materials for Coinseed. James said his office has received more than 170 complaints from investors since authorities filed a complaint.
Davaasambuu called James a “business abuser” in his statement and said he planned to move his business away from New York to a “cryptocurrency-friendly state.” He said New York pushed for the closure of his business after refusing state officials’ offer to pay “a few hundred thousand dollars to close the investigation.”
Davaasambuu said he believes his business will still be up and running if he doesn’t open it in New York. Using vulgarity to describe James and his office, he warned other business owners to “run away from New York if you run a crypto business there.”