The New York Attorney General (NYAG) Letitia James has decided to shut down Coinseed, a New York-based crypto exchange, for allegedly defrauding its customers.
According to a September 13 report published on Bloomberg, NYAG Letitia James ordered Coinseed Inc to permanently cease all operations and pay $3 million in fines.
The crypto exchange has been accused of freezing withdrawals and converting clients’ funds in Dogecoin without consent. Furthermore, the crypto exchange is also alleged to have illegally emptied its bank accounts and issued unlicensed securities.
In the same context, Coinseed crypto exchange faces a new charge for failing to obey previous court orders to cease operations. After a thorough investigation, James found that the crypto exchange continued to participate in “egregious and fraudulent activities” during the ongoing court process, according to Law360:
“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.”
Coinseed received an initial cease and desist order in June 2021 after the NYAG successfully secured a temporary restraining order. The exchange’s woes started in February after James sued its co-founder Delgerdalai Davaasambuu for allegedly defrauding thousands of investors out of more than $1 million hosted in the exchange.
Moreover, the United States Securities and Exchange Commission (SEC) also hit the firm with another lawsuit that same month. SEC sued the crypto exchange for illegally trading commodities without registering as broker-dealers and misinforming investors.
In that context, Brian Whitehurst and Amita Singh, both Assistant attorneys, confirmed receiving more than 170 complaints from Coinseed customers, claiming that their wallets were compromised and tens of dollars shrunk since February.
According to Singh, Davaasambuu had previously owned the mess and promised to return all the funds to users affected at the time, but he has been silent about the allegation ever since.
In a related legal report, Michael Ackerman has pleaded guilty for wiring a fraud in a scam he orchestrated alongside two others in 2017, after a successful court execution on September 10.
All accused culprits ran the Q3 Trading Club that lured customers, promising to offer 15% monthly returns at the time. Ackerman has now pleaded guilty for causing investors to lose more than $30 million and faces 20 years in prison if convicted in a January 2022 court ruling.