On September 13, 2021, New York Attorney General (NYAG) Letitia James announced the entry of a default judgment against crypto platform Coinseed and its CEO. The default judgment includes broad injunctive relief against Coinseed’s future operations in New York state. The case is one of many that regulators have recently brought against crypto trading platforms.
The NYAG commenced the action in February 2021 in conjunction with the SEC. The NYAG suit alleged that Coinseed and its CEO violated New York’s Martin Act and the antifraud provisions of Executive Law § 63(12) through the offer and sale of unregistered digital securities via an ICO, the making of material misrepresentations to investors, and the operation of an unregistered commodities broker. In June 2021, a New York court granted the NYAG’s motions for a preliminary injunction and appointed a temporary receiver for the benefit of investors. After the New York court granted the preliminary injunction, the NYAG alleged that Coinseed sought to circumvent the court’s order through the creation and sale of a new virtual currency.
Coinseed failed to heed the June court order and did not respond to the NYAG’s lawsuit. Thus, the court entered a default judgment against Coinseed and its CEO on September 9, 2021. The default judgment includes a broad permanent injunction against further operations in New York state, appoints a permanent receiver to wind-down operations and return money to investors, and assesses over $3 million in fines and penalties.