New York prosecutor has received a court order on Monday to shutter the operations of crypto exchange Coinseed, which is accused of defrauding its customers by illegally investing their funds in Dogecoin without consent.
The order names the crypto exchange and its founder and CEO Delgerdalai Davaasambuu, ordering both to halt the ‘illegal and fraudulent operations’. It also ordered a money judgment of $3 million against both the company and its founder.
Furthermore, the count has appointed a permanent receiver to protect investors’ funds from further solicitation. The receiver has already taken control of the website of the crypto exchange through which the fraudulent activities were conducted.
Coinseed is a relatively small digital currency trading platform. Its primary offerings include auto-investing and social trading products and also allowed users to earn interest rewards from decentralized lending protocols.
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The exchange, however, attracted the attention of the New York authorities after it converted all its clients’ proceeds into Dogecoin, a highly volatile meme-inspired cryptocurrency. It was further accused of defrauding its ICO investors of $1 million through undisclosed markups to the quoted price to extract additional fees from investors.
Violated Court Order
The New York Attorney General’s office received a preliminary injunction against Coinseed in June to safeguard its customers’ funds. But, the exchange and its CEO defied the order to ‘by creating, offering, and selling a new virtual currency’, which was also offered to New York investors.
“For years, Coinseed and its CEO have engaged in egregious and fraudulent activities that have cheated investors out of millions,” said New York Attorney General Letitia James.
“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. We will continue to pursue all who attempt to abuse and manipulate the system and ensure investors are protected.”