Cryptocurrency exchange Coinseed was sued by the New York Attorney General (NYAG) early this year. The NYAG then accused the bitcoin (BTC) exchange that it secretly invested customers’ money in dogecoin (DOGE).
The company had frozen customer withdrawals and used their funds to invest in the “meme cryptocurrency” without authorization. In addition, the company also operated without the necessary permits, reports Bloomberg on Sept 14:
New York wins a court order shuttering Coinseed, a small crypto platform accused of illegally selling securities and acting as a broker-dealer before sinking all its investors’ cash into Dogecoin https://t.co/dBvlwOqMEj through @markets
— Bloomberg Crypto (@crypto) September 14, 2021
The NYAG won the lawsuit and on September 13, Attorney General Letitia James ordered the permanent closure of Coinseed. In addition, the small exchange must pay a $3 million fine to aggrieved investors, various court fines and the company never again to operate in New York state.
James actually sued Coinseed and CEO Delgerdalai Davaasambuu back in February for defrauding thousands of investors. Shortly afterwards, the US Securities and Exchange Commission (SEC) also sued the company for a lack of multiple licenses.
A judge ruled in favor of our lawsuit to shut down the cryptocurrency trading platform @coinseedapp and installed a permanent receiver to protect investors’ funds.
Coinseed can no longer continue its fraudulent and illegal conduct that cheated investors out of millions. https://t.co/ItfYTzv7Zi
— NY AG James (@NewYorkStateAG) September 13, 2021
The company simply ignored the charges. Subsequently, the NYAG received as many as 170 complaints from customers who said their balances on the exchange had shrunk dramatically. James says Coinseed was previously ordered to shut down all operations, but the company is continuing with its fraudulent activities.
Instead, founder Davaasambuu launched a “Fuck Letitia James (FLJ)” token of the summer and called on his clients to harass the attorney general. That won’t exactly help his lawsuit. The Coinseed website is already down.