New York Attorney General Obtains Judgment Against Crypto Trading App Coinseed | Practical Law

New York Attorney General Obtains Judgment Against Crypto Trading App Coinseed | Practical Law

The New York Attorney General (NYAG) secured a judgement against crypto-trading app Coinseed that permanently enjoins Coinseed's fraudulent and illegal operations involving virtual currency (VC) trading.

New York Attorney General Obtains Judgment Against Crypto Trading App Coinseed

Practical Law Legal Update w-032-6728 (Approx. 6 pages)

New York Attorney General Obtains Judgment Against Crypto Trading App Coinseed

by Practical Law Finance
Published on 20 Sep 2021 • USA (National/Federal)
The New York Attorney General (NYAG) secured a judgement against crypto-trading app Coinseed that permanently enjoins Coinseed's fraudulent and illegal operations involving virtual currency (VC) trading.
On September 13, 2021, the New York Attorney General (NYAG) secured a judgement from the New York State Supreme Court against crypto trading app Coinseed that permanently enjoins Coinseed's fraudulent and illegal operations involving virtual currency (VC) trading. The court sided with the NYAG, who first filed a lawsuit against Coinseed and its top two executives (collectively, defendants) in February 2021 for allegedly violating New York's Martin Act and Executive Law § 63(12) by:
  • Selling its own unregistered securities in the form of digital tokens.
  • Making material misrepresentations about the composition, responsibilities, and professional experience of Coinseed's management team.
  • Operating as an unregistered commodities broker-dealer for VC trades through Coinseed's mobile application.
  • Making material misrepresentations to investors and omitting certain information regarding the fees associated with VC trading on Coinseed.
  • Defrauding investors in the US out of more than $1 million.
According to the order, Coinseed is permanently enjoined from engaging in all types of "fraudulent, deceptive, and illegal acts and practices" including but not limited to:
  • Selling, purchasing, negotiating, or any other activity involving securities or commodities, including VCs or digital tokens, including the attempt to solicit new customers to the Coinseed platform.
  • Participating in the securities or commodities business, whether as a broker, dealer, investment advisor, or in another professional role.
  • Offering securities advice in any format (including written and oral communications).
  • Distributing funds (both US dollar and VC assets) collected from the deposits or trading of Coinseed or its investors.
  • Withdrawing, converting, transferring or disposing VC held on behalf of Coinseed investors or derived or collected from Coinseed.
  • Controlling, altering, or editing the Coinseed website and mobile application.
  • Destroying, tampering with, or hiding any books or records of Coinseed, such as ledgers, statements, or any other property.
The NYAG was previously granted a preliminary injunction and temporary restraining order against Coinseed in June 2021.
In addition to injunctive relief, the court ordered defendants to pay a fine of roughly $3 million for defrauding its customers. The court also ordered appointment of a permanent receiver to oversee Coinseed's investor funds and manage its liquidation operations.