NY Court appoints Michelle Gitlitz to safeguard Coinseed client funds

Rick Steves

A previously issued temporary restraining order continues to block Coinseed and its CEO from making any further unauthorized trades.

New York Attorney General Letitia James has secured a court order that continues a mandated pause on the operations of the cryptocurrency trading platform Coinseed, which has been charged for fraud together with CEO Delgerdalai Davaasambuu.

Deemed illegal and fraudulent by the NY AG, Coinseed continued its operation in the months since the suit was filed. According to the new charges, the firm commenced additional fraudulent conduct by trading in investors’ accounts without permission and then blocking investors from accessing those accounts.

The New York County State Supreme Court appointed Michelle Gitlitz, the global head of Crowell & Moring LLP’s Blockchain and Digital Assets practice, as a court-appointed receiver with special powers to safeguard investments already made on the trading platform.

A previously issued temporary restraining order continues to block Coinseed and its CEO from making any further unauthorized trades.

“When platforms operating illegally in New York seek to trade on investors’ money, we will use every tool at our disposal to stop their unlawful actions. This order appoints a court-appointed receiver before any other investments are squandered by Coinseed and its CEO”, said Attorney General James.

“We will not allow rogue operators to hold innocent investors’ funds hostage, while they deplete accounts and transfer virtual currency to an offshore, unregulated trading platform. We will continue fighting for the thousands of investors defrauded by Coinseed.”

According to the NY AG, the office received more than 170 complaints from investors who were concerned about protecting their assets due to Coinseed’s fraudulent conduct.

Coinseed and its two top executives stand accused of having sold digital asset securities called “CSD tokens” to hundreds of investors from at least December 2017 to May 2018. AG James said Coinseed’s fraud totaled more than $1 million.

The complaint filed in federal district court in Manhattan claims that no registration statement for the offering was filed and that the offering failed to satisfy any exemption from registration.

“By failing to file a registration statement, Coinseed denied prospective investors the information required for such an offering to the public. As alleged, through the offering Coinseed raised at least $141,410”, said the official statement, which added the SEC is seeking permanent injunctive relief, disgorgement plus prejudgment interest, and civil penalties.

The tone of the New York Attorney’s Office on crypto has become more aggressive ever since its capitalization market went through the roof late last year. In early March, AG James was clear: “Either play by the rules or we will shut you down”.

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