What Happened to Coinseed to Prompt the Shutdown?

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Jun. 9 2021, Published 2:14 p.m. ET

Spare-change cryptocurrency investment app Coinseed is no more. Following a lawsuit from New York Attorney General Letitia James, the app has shuttered.

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What happened to prompt the shutdown of the Coinseed app? Can users expect to get their Coinseed wallets reimbursed?

Coinseed scam—all the details

Coinseed announced that it's shutting down following the lawsuit from the New York attorney general. Reportedly, the company scammed users by way of an unregistered ICO (initial coin offering) in 2017.

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According to Coinseed, the ICO was totally legitimate. The app's desktop page reads, "Our ICO excluded US investors and we’ve paid back more than twice the ICO amount to the ICO investors as rewards so far. And there hasn’t been any (not even a single one) complaints about our ICO or our token from the investors." 

James says otherwise, which is why the lawsuit came to being.

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The details of the Coinseed lawsuit from NYAG James

While the Martin Act of N.Y. keeps the logistics of the subpoena secret, we do have an inkling of what the lawsuit is about. The lawsuit suggests that Coinseed took $1 million fraudulently from investors during the ICO process. This is one of many securities fraud charges on the docket for regulators focusing on cryptocurrency.

The state of New York originally filed the lawsuit in February. By May, James filed a court motion to shutter Coinseed’s operations. This endeavor included freezing trading activity on the app. The state's Supreme Court Judge Andrew Borrok and Washington, D.C. attorney Michelle Gitlitz are also involved in the proceedings.

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Coinseed's response: A "F***LetitaJames" token

Coinseed leaders are so angry with James that they created a cryptocurrency token about it. It's worth noting that Coinseed spelled Letitia James' name wrong on the token. It isn't clear whether the misspelling was intentional or born out of rage.

Coinseed CEO Delgerdalai Davaasambuu made a lot of claims about the state of New York. For one, the company says that the state asked it to pay a few hundred thousand dollars. Again, this is just a claim and Coinseed doesn't have any backing other than a rant on a landing page.

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What will happen to your Coinseed wallet post-shutdown?

If you have funds in a Coinseed wallet, you aren't going to be able to get that money out right now. Davaasambuu closed Coinseed to avoid continuing with the lawsuit. 

The website says, "As for the user funds, it will be returned soon and we’re interviewing law firms to hire for the matter. They will reach out to you before long. 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. Our payment providers have terminated our account in February 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."

There's a receiver to guard funds during the lawsuit and help protect cryptocurrency investors.

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