SEC and NY AG Sue Virtual Currency Trading Platform Coinseed

In a pair of lawsuits filed yesterday, the U.S. Securities and Exchange Commission (SEC) and New York Attorney General Letitia James accuse Coinseed, Inc. and its founder and CEO, Delgerdalai Davaasambuu, of skirting state and federal securities and commodities registration laws. The SEC’s case claimed that the defendants offered and sold digital assets without first registering the offering with the SEC. New York contended that the above-named defendants, as well as CFO Sukhbat Lkhagvadorj’s actions violated parallel New York laws.

The SEC’s suit explained that from approximately December 2017 to May 2018, Coinseed offered and sold “CSD tokens” as securities to investors in return for at least $141,000. Coinseed reportedly told investors that the money would be used to fund Coinseed’s business, and that in exchange for their investment, purchasers would receive a percentage of the platform’s revenues generated from fees associated with its users’ purchases and sales of digital assets.

Coinseed allegedly did this without registering with the SEC, without an exemption, and to the detriment of its investors because it did not provide material information that issuers are required to include in registration statements when soliciting public investment. Instead, the SEC claims, “investors were left to rely only on the information Defendants chose to share about Coinseed and CSD tokens.”

In a statement, New York Attorney General Letitia James commented that “for over three years, Coinseed and its executives flagrantly and illegally violated New York state laws, but the corporate greed perpetrated by Coinseed while committing fraud against thousands of investors ends now. 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.”

The suits against Coinseed add to a growing list of enforcement actions brought against virtual platforms and cryptocurrency providers for selling unregistered securities. For example, last September, the SEC fined eSports gambling platform Unikrn, Inc. for conducting an initial coin offering (ICO) without first meeting the registration requirements.