New York attorney general has claimed that crypto firm Coinseed defrauded investors through the sale of a “worthless” token.
New York State Attorney General Letitia James had announced charges against Coinseed, a crypto investment platform, for supposedly defrauding investors out of over $1 million.
The filing revolves around an ICO for Coinseed’s CSD token, which was held in December 2017. The company allegedly raised over $100,000 with the sale of 200,000 of these CSD tokens. The NYAG claimed that the tokens had “no functionality” in the company’s mobile application, noting that the tokens were “not required to use the trading platform, or not manage one’s account.” The state also said that Coinseed traded crypto without registering as a broker-dealer.
On the other hand, the SEC has also filed a related lawsuit against the company.
In some court document, the state claimed the Coinseed has concurrently violated the Martin Act – a New York particular anti-fraud law – and that the company has “unlawfully sold unregistered securities in the form of a digital token, while making material misrepresentations about their management team.” Remarkably, James also appealed Martin Act in the state’s lawsuit against crypto exchange Bitfinex and stablecoin issuer Tether, which is still on going.
Together with Coinseed, James also filed suit against two of its execuitives: CEO Delgerdalai Davaasambu and CFO Sukhbat Lkhagvadorj.
The documents stated that Lkhagvadorj “misrepresented himself as a former Wall Street trader, when in truth he had never traded securities or commodities.”
Lawsuits around fraudulent ICOs and tokens that cannot be securities are not new in the crypto industry.
The most high-profile example could be the recent SEC case versus Ripple labs, whose token XRP, has continuously fallen: many exchanges have delisted it, and asset managers like Grayscale have removed it from their crypto funds.