$3 000 000 USD

FEBRUARY 2021

UNITED STATES

COINSEED

DESCRIPTION OF EVENTS

"Coinseed will round up your credit or debit card purchases to the next dollar, tally the total difference, and automatically invest that amount into a set of cryptocurrencies of your choice."

 

"[W]e are very excited to launch Coinseed app so that you can invest your spare changes with just a click of a button. All you have to do is to connect your credit/debit card and we will round up your purchases to the next dollar to invest in cryptocurrencies. It is a fun and simple way to get your feet wet with cryptocurrencies with minimal investment."

 

"Coinseed's app had allowed customers to invest their spare change in cryptocurrencies. Customers could allocate their money to any of 17 cryptocurrencies or crypto lending protocols, and Coinseed was supposed to handle the investments. “We are looking to build a bridge for the masses to adopt crypto in the most seamless way,” it said in an earlier SEC filing."

 

"The firm was founded in 2017 by two Mongolians who studied in New York: CEO Delgerdalai Davaasambu, who wrote the code and holds 80% of the shares in the company, and CFO Sukhbat Lkhagvadorj, who handled the finances and holds the other 20%." "I started Coinseed with the idea to create the next generation of crypto investing by making it easier to invest in cryptocurrencies. And we were able to create and deliver the best version of what I imagined Coinseed to be." "Coinseed was a great idea and it has proven that micro-investing is the best way to invest in highly volatile markets such as cryptocurrencies."

 

According to SEC filings, "Sukhbat has worke[d] at multiple Wall St. firms including a fixed income broker-dealer and an economic consulting firm focusing on analyzing securities. He then recognized the rapidlygrowing importance of big data on virtually all aspects of businesses and transitioned into a big data analytics consultant. As Sukhbat consulted and built big data infrastructures for well known companies such as Uber, his interest in decentralized data storage and blockchain technology intensified over time. Sukhbat focuses on the business side of Coinseed including partnership management, customer service, and marketing."

 

"Co-Founder Del is an early Bitcoin enthusiast (since 2011) and he has been through multiple boom and bust cycles of cryptocurrency. He also worked as the technical co-founder for multiple other startups including MyEtherShop which allows people to spend Ethereum coins for online purchases from Amazon. Del focuses on the technical development of Coinseed."

 

"It seemed to be a successful model; several customers reported tenfold increases to their portfolios." "Coinseed continued to grow even during the “crypto winter” of 2018 and 2019. We’ve expanded our development team and the crypto market has finally taken off in a monster way. We were living the American dream."

 

"As we launched our iOS and Android app on November 21, 2017, we had a tremendous growth without any paid marketing. We already hit our banking deposit limit only within the first 2 weeks of our launch. To manage this massive growth, we reduced our daily deposit limit for our users several times. Thus, in order to scale our platform in the US and globally, we are launching an ICO pre-sale."

 

"Coinseed will issue 5,000,000 CSD tokens to participants through the token sale (1,500,000 CSD tokens for the pre-sale) which is 50% of the total supply of 10,000,000 CSD tokens. Join the pre-sale to receive up to 35% bonus on your CSD token purchase!"

 

"[I]n January - Feb 2021 before the lawsuit you could withdrawal $250 a day." "There were also reviews and stories of people having trouble withdrawing money way earlier than when they totally stopped. They changed their "daily withdrawal" limit multiple times. I think early on it was $1000 usd a day but at the end it was $250." "Coinseed had closed withdrawals for well over a month before it."

 

"In February, the US Securities and Exchange Commission and the New York Attorney General pressed charges against the firm for allegedly defrauding investors into buying a worthless token and lying about the expertise of its executives. The NYAG claimed Coinseed fraudulently took $1 million from investors in a token sale. Coinseed’s social media feeds have gone dark since the filings, and its app is no longer listed on Apple’s or Google’s app stores."

 

"The filing centers around an ICO for Coinseed’s CSD token, held in December 2017. The company allegedly raised over $100,000 through the sale of 200,000 of these CSD tokens. The NYAG claims the tokens had “no functionality” in the company’s mobile application, noting that these tokens were “not required to use the trading platform, or not manage one’s account.” The state has also said Coinsend traded crypto without registering as a broker-dealer."

 

"In 2017, we conducted an ICO and raised a good amount of money from non-US investors (mostly European) to support Coinseed’s future development." "Our ICO excluded US investors and we’ve paid back more than twice the ICO amount to the ICO investors as rewards so far." "[W]e made a fatal mistake by simply living in New York. It may sound strange, but it’s exactly what happened."

 

"In SEC filings, Coinseed said that Lkhagvadorj has worked at “multiple Wall St. firms including a fixed income broker-dealer and an economic consulting firm focusing on analyzing securities.”" "However, the NY attorney general said that Lkhagvadorj “had never traded securities or commodities.”"

 

New York Attorney General Letitia "James first sued Coinseed in February, accusing the company of charging hidden fees, making false claims and selling “worthless” digital tokens."

 

"James also sued Davaasambuu and Chief Financial Officer Sukhbat Lkhagvadorj, saying they overstated the midtown Manhattan-based company’s management experience, while Lkhagvadorj misrepresented himself as a former Wall Street trader."

 

“Unregulated and fraudulent virtual currency entities, no matter how big or small, will no longer be tolerated in New York,” said Attorney General James. “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.”

 

“In defiance of court orders, this company has continued to operate illegally and unethically, holding investors’ funds hostage and underscoring the dangers of investing in unregistered virtual currencies,” she added.

 

“Attorney General James seeks to stop Coinseed and the two individual defendants from further operating as unregistered commodities broker-dealers through their mobile application, as well as return investments of Coinseed’s worthless cryptocurrency, the CSD token,” said a statement.

 

"In court documents, the state claims Coinseed has repeatedly violated the Martin Act—a New York-specific anti-fraud law—and that the company “unlawfully sold unregistered securities in the form of a digital token, while making material misrepresentations about their management team.” Notably, James similarly invoked the Martin Act in the state’s lawsuit against crypto exchange Bitfinex and stablecoin issuer Tether, which remains ongoing."

 

"Attorney General James specifically charges Coinseed and the two executives with violating New York’s Martin Act and New York Executive Law § 63(12). Attorney General James seeks restitution for the thousands of defrauded investors, disgorgement of already raised funds with interest, permanent injunctions against all the defendants to immediately stop this illegal behavior, and an officer-and-director bar against individual defendants Davaasambuu and Lkhagvadorj and a bar against Coinseed prohibiting them from participating in any future securities offerings or as commodities broker-dealers. Attorney General James also seeks the full closure of Coinseed’s business operations."

 

"This matter was investigated in parallel with the U.S. Securities and Exchange Commission (SEC), which, today, filed a similar but separate action against Coinseed. Attorney General James wishes to thank the SEC for their cooperation in this matter."

 

"The company was temporarily shut down in June through a court-ordered preliminary injunction, but James said Coinseed continued to sell unauthorized cryptos."

 

"Since initially filing the suit, the AG’s office has received more than 175 complaints from investors who were concerned about protecting their assets from Coinseed, James said." According to Coinseed, "there hasn’t been any (not even a single one) complaints about our ICO or our token from the investors."

 

"Coinseed, for its part, announced on Twitter that it’s “giving away free FLJ (F–k Letita James) token.”" "Regardless of that, NYAG office has decided to set a precedent of using the infamous Martin Act on crypto companies using Coinseed. The Martin Act is an outrageous state law which gives New York Attorney General almost unlimited power to subpoena and investigate companies in NY even if there were no complaints against them. And an even crazier thing is that we can’t even disclose the subpoena. It had to be secret. See, everything should’ve been fine if we weren’t NY-based."

 

"Coinseed is a small startup with little money and we couldn’t hire good lawyers to fight them in the court which would cost millions of dollars." "[T]here is still no clear legal frameworks for crypto markets and there was zero in 2017. We have complied with their every request, provided every single documents they asked and we even had discussions with them to what should we do to make our app more compliant the current laws. They just kept assuring us that everything was fine and they would finish the investigation very soon. Why would they wait for 3 years?"

 

"While i believe his perspective to a certain extent, the fact that he doesn't explain why all our balances were change to doge is suspicious. Even if it's a lie, tell us that it's only a front-end glitch or something."

 

"Coinseed has done nothing whatsoever to allay our fears, and some folks in this group have over 100K on the site."

 

"Coinseed’s lawyers want out of the cases. In a declaration filed last week, Morrison Cohen said that Coinseed’s founders haven’t responded to its communications, delaying “important decisions” about the upcoming cases. Morrison Cohen announced its intention to cut ties with Coinseed on April 21. “It is clear that the attorney-client relationship has broken down irreparably,” wrote Jason Gottlieb, a partner for Morrison Cohen. Gottlieb declined to comment about the case to Decrypt."

 

"The court order, issued by New York State Supreme Court Justice Andrew Borrok against Coinseed and its CEO Delgerdalai Davaasambuu, permanently halted the company’s operations, James said."

 

"[T]he balance in their accounts ultimately means nothing if the proceeds can't be withdrawn." "I received my last payment around the end of January [2021], and shortly after that it seemed like a multitude of issues started to happen." Reddit user oldstonewall1 reported.

 

"I have been trying to cash out my account since early December [2020] and have received the same message that "withdrawals have been temporarily disable." 4 months is more than temporary in my opinion. Deposits are not "temporarily disable". They didn't even care to use proper english in their message. They have not answered a single email, or other form of message from me. I have sent at least a dozen." reported ccmichael.

 

“Our payment providers have terminated our account in February [2021] due to the lawsuit and we couldn't find any other payment providers since then. I have considered sending withdrawals by crypto, but our lawyers were against it. Because it will just open a door for NY AG to sue me.”

 

"We are Synapse, the back-end banking services provider for various financial institutions and previously of Coinseed. As of January 31, 2021 we no longer service Coinseed." "They stopped withdrawals as of [February 17th, 2021]."

 

"As for the user funds, it will be returned soon and we're hiring a law firm for the matter. They will reach out to you soon. However, please annoy the NYAG as much as you can since they are the people who caused all the mess. Call them, email them, write letters to them, curse them. The more, the better. We haven't had any payment providers since February because our payment provider has discontinued the relationship due to the lawsuit and we have no option to send or receive payment since then."

 

"“This entire thing has made me pretty sick,” said Ace201613 on r/CoinseedSCAM, a subreddit that angry customers set up to log their fury and to coordinate a response. In a Facebook group of the same name, two customers report losses of over $100,000, and dozens for lesser sums. Incensed, around 50 Facebook users have expressed interest in a class-action lawsuit against Coinseed. A Coinseed spokesman could not be reached for comment."

 

James said Monday, "We’re sending a clear message to the entire industry that you either play by the rules or we will shut you down."

 

"The work of Michelle Gitlitz, the court-appointed Receiver in the New York v. Coinseed action is ongoing and has been productive. Ms. Gitlitz and her team are in the process of analyzing the Bitcoin and Ethereum blockchains to trace assets, including funds that were withdrawn from accounts associated with Coinseed. This process is arduous, complex and takes time. Ms. Gitlitz has engaged a third-party asset-tracing company (CipherTrace) to assist in this regard. She has had many meetings with CipherTrace, and their work has been incredibly useful. Her team is also in the process of trying to obtain documents and information from exchanges and financial institutions associated with these withdrawals."

 

"Thank you for your continued patience in this matter. My work as the court-appointed Receiver in the New York v. Coinseed action is ongoing and has been productive. However, I have not yet located any assets to recover. I appreciate that you have sustained significant losses and that the Court has found the Defendants liable to you in the sum of $3 million. The Defendants have not voluntarily turned over any funds to satisfy the judgment. The process to locate funds is generally long and arduous. The fact that crypto is involved creates additional complexity. I wish I had more of a substantive update for you."

 

"With the assistance of CipherTrace, a blockchain analytics firm, I have identified certain transactions conducted by the Defendants that may lead to the location of assets stolen by the Defendants. Earlier today, I filed a letter with the Court attaching two subpoenas --one to Binance and one to Gemini Trust Company. I have requested that the Court issue the subpoenas to each exchange. Obtaining documents from Binance and Gemini Trust Company will hopefully enable me to continue tracing assets that were stolen by the Defendants."

 

"Wish folks cared about the Coinseed scam as much as they seem to care about yours individually. That's millions gone. But atleast you got some back."

Coinseed was a platform founded by two Mongolians based in New York which purported to allow users to invest spare change in cryptocurrency automatically as they made purchases. It also would allow users to automatically choose a balanced growth portfolio. According to reports, the platform quickly ran into issues with banking limits and had to further limit customer deposit amounts. In an effort to finance expansion, they launched an ICO (initial coin offering) in 2017.

 

Regulators in New York came after them in full force, ordering a $3m fine and the platform to be closed. The firm initially had legal counsel, however there are reports of a communication breakdown. In the end result, multiple social media were deleted or disabled and investors were denied any ability to withdraw their funds on the platform. At one point, investors funds in their account were automatically converted to a portfolio based on Dogecoin. The Coinseed platform has not voluntarily returned funds to the reciever general, however there is an alleged plan to distribute the funds via a new Coinseed website. It remains unclear whether any amount will be collectible.

HOW COULD THIS HAVE BEEN PREVENTED?

Funds on the Coinseed platform were stored under the control of a single individual (the CEO), who single-handedly prevented any disbursement or withdrawal actions from occurring. Customers of the platform did not have any visibility to ensure their assets were fully backed with real coins. There was no insurance available to protect against unforeseen failures.

 

Simplifying the regulation would allow for greater understanding from both the general public (who could avoid fraudulent platforms more effectively) and the platforms (who could comply faster with clear understanding). A central issue in this case was that of jurisdiction, with Coinseed believing that marketing their ICO exclusively to investors outside of New York state would be allowed, while the state of New York held jurisdiction because they lived there. The burden expected by law was significantly larger than a small firm such as Coinseed could comply with, and as such it was unreasonable. There are multiple indications that Coinseed made multiple attempts to work with regulators prior to the lawsuit.

 

The regulation fully failed to protect investors in this case, as it failed initially to address the key and primary issue of proper multi-signature wallet setup. By having customer funds in the hands of a single individual CEO, this allowed him to single-handedly hold all investors hostage, as well as perform unauthorized trades on their behalf. A signatory group would be highly unlikely to make a similar decision. Indeed, the CFO and others around him reportedly left the company at the time. Regulators failed to have any funds available to assist affected users, and a lack of dialog between regulators and industry played a key role in the downfall as well, with the case ending in open hostility.

 

Check Our Framework For Safe Secure Exchange Platforms

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Coinseed Mysteriously Switched User Accounts to Dogecoin, Customers Say - Decrypt (Sep 28)
New York Files Fraud Charges Against Crypto Firm Coinseed - Decrypt (Sep 28)
Attorney General James Sues to Shut Down Illegal Cryptocurrency Trading Platform and Virtual Currency, Seeks to Recoup Defrauded Funds for Thousands of Investors | New York State Attorney General (Sep 28)
https://ag.ny.gov/sites/default/files/the_people_of_the_stat_v_the_people_of_the_stat_complaint_2.pdf (Sep 28)
More Media Exposure of Coinseed fraud : CoinseedSCAM (Sep 28)
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Del's Mongolian Address : CoinseedSCAM (Sep 28)
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Coinseed - Invest Your Spare Change in Cryptocurrencies - ICO Pre-sale Live | Bitcoinist.com (Sep 28)
NY Attorney General shuts down Coinseed; Here's why? - TechStory (Sep 28)
https://medium.com/@coinseed/how-coinseed-wants-to-make-it-easy-for-anyone-to-invest-in-cryptocurrencies-d7f9d7139527 (Sep 28)
https://medium.com/@coinseed/find-it-complicated-to-invest-in-bitcoin-then-we-are-here-to-help-7ece2a96f0bb (Sep 28)
https://medium.com/@coinseed/coinseed-announces-its-pre-sale-ico-f4d1c71f6a6c (Sep 29)
@coinseedapp Twitter (Sep 29)
oldstonewall1 comments on Email from Del from Coinseed. Anyone else get it? (Sep 29)
Wow : CoinseedSCAM (Sep 29)
Whole Account Wiped : CoinseedSCAM (Sep 29)
Received this email from Coinseed today. : CoinseedSCAM (Sep 29)
Did we win!? Did anyone else receive this email? : CoinseedSCAM (Sep 29)
Fuck Letita James (Sep 29)
Fuck Letita James (Sep 29)
Coinseed | Invest, Earn, Trade - Crypto (Sep 29)
New York Judge May Require Embattled Trading App Coinseed to Halt Operations - CoinDesk (Sep 29)
Investing in Cryptocurrencies Is 'Not Prudent,' Says New York Attorney General - CoinDesk (Sep 29)
New : CoinseedSCAM (Sep 29)
PS2: As for the Dogecoin, I'm good at trolling! : CoinseedSCAM (Sep 29)
https://preview.redd.it/d2my5j4zhz371.png?width=982&format=png&auto=webp&s=78c73c95f9a1f400eed6898fbeddbda9cbaa4046 (Sep 29)
MGWhodat comments on Don’t jump to conclusions, everything may work itself out (Sep 29)
Update - Received today : CoinseedClassAction (Sep 29)
Update received this week : CoinseedSCAM (Sep 29)
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Coinseed Investor Update : CoinseedSCAM (Sep 29)
I'm not convinced Coinseed is a scam : CoinseedSCAM (Sep 29)
Coinseed, Inc. and Delgerdalai Davaasambuu (Release No. LR-25032; Feb. 17, 2021) (Sep 29)
Woah : CoinseedSCAM (Sep 30)
Coinseed is a scam, ZERO customer support : CoinseedSCAM (Sep 30)
Reddit - Dive into anything (Sep 30)
Much anticipated 70.3 update arrives- STILL CANNOT WITHDRAW : CoinseedSCAM (Sep 30)
Coinseed Scam CEO’s Facebook: Dalai Davaa : CoinseedSCAM (Sep 30)
Last message from Sukhbat before blocking me: “Please contact the support line.” : CoinseedSCAM (Sep 30)
So what are we going to do? : CoinseedSCAM (Sep 30)
From SynapseFI : CoinseedSCAM (Sep 30)
From SynapseFI : CoinseedSCAM (Sep 30)
Coinseed - can I do anything? : CoinseedSCAM (Sep 30)
Coinseed Deactivated Their Own Sub!!! : CoinseedSCAM (Sep 30)
Co-founder - no longer since last week or so : CoinseedSCAM (Sep 30)
Coinseed is a scam, holds funds captive. : CoinseedSCAM (Sep 30)
Helpful Links to Report Coinseed Scam : CoinseedSCAM (Sep 30)
https://sec.report/CIK/0001760049 (Sep 30)
So are we fucked?? : CoinseedSCAM (Sep 30)
Further Action : CoinseedSCAM (Sep 30)
BREAKING: I was able to finally start a withdrawal : CoinseedSCAM (Sep 30)
BREAKING: I was able to finally start a withdrawal : CoinseedSCAM (Sep 30)
Anyone see this gem? This Del guy is in lala land. Wonder if we can call this synapse # and get some answers. : CoinseedSCAM (Sep 30)
Getting what is ours : CoinseedSCAM (Sep 30)
Most concerning part of lawsuit. Take daily screenshots of your Coinseed Balance on the App I guess ‍♂️ : CoinseedSCAM (Sep 30)
Email from SEC. I will post links below... : CoinseedSCAM (Sep 30)
Hopefully this is true I read this from a few days ago not the whole article but the part where it says they w as not to get us our money : CoinseedSCAM (Sep 30)
Coinseed has deleted their Facebook page : CoinseedSCAM (Sep 30)
I heard back from the SEC : CoinseedSCAM (Sep 30)
Ok people. Here is the complaint filed by NYAG. The AG is asking for restitution and disgorgement. Email addresses of the lead prosecutors are on the last page. Might be worth reaching out to them. I also filed a complaint with the BBB. : CoinseedSCAM (Sep 30)
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A hypothesis regarding what’s going on. : CoinseedSCAM (Sep 30)
https://i.redd.it/1c0a570w0tq61.jpg (Sep 30)
Coinseed alternatives : CoinseedSCAM (Sep 30)
Crypto Platform Coinseed Sued by New York and SEC for Selling 'Worthless' Tokens (Sep 30)
What Happened to Coinseed? Shutdown, Explained (Sep 30)
@coinseedapp Twitter (Sep 30)
https://www.coinseed.io/ (Sep 30)
Letitia James, SEC sue to shut down ‘fraudulent’ Coinseed crypto platform (Sep 30)
NY Supreme Court issues shutdown, $3M payout from Coinseed (Sep 30)
https://medium.com/@coinseed/understanding-your-cryptocurrency-investment-risk-tolerance-2159ddcb3e7a (Sep 30)
https://medium.com/@coinseed/what-is-the-bitcoin-frenzy-all-about-a-comprehensive-examination-of-the-bitcoin-spectrum-fe18849d6ee3 (Sep 30)
https://medium.com/@coinseed/how-to-start-investing-in-crypto-in-high-school-12689e2e585e (Sep 30)
https://medium.com/@coinseed/4-tips-to-help-you-overcome-psychological-barriers-to-profitable-trading-c72d9580aacb (Sep 30)
https://medium.com/@coinseed/5-strategies-on-how-to-succeed-in-your-30s-with-cryptocurrency-a0bd861bbcdf (Sep 30)
https://medium.com/@coinseed/earn-your-cash-back-in-crypto-on-coinseed-84673e085cf8 (Sep 30)
Coinseed (Sep 30)
Coinseed (Sep 30)
Coinseed (Sep 30)
Research Questions : CoinseedSCAM (Oct 28)

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