The United States Securities and Exchange Commission (SEC) is close to the end of its action against Coinseed, Inc. and its founder and chief executive Delgerdalai Davaasambuu.
Earlier today, Judge Paul G. Gardephe of the New York Southern District Court signed an order of default against Coinseed and its founder.
The Judge said that an order of default will be entered against Defendants Coinseed and Delgerdalai. This matter is referred to Magistrate Judge Netburn for an inquest concerning an appropriate disgorgement remedy and civil penalty award.
The defendants have not responded to the order to show cause, and did not appear at the August 19, 2021 hearing. Accordingly, an order of default is entered against them.
For the reasons discussed at the August 19, 2021 hearing, the defendants are permanently restrained and enjoined from violating, directly or indirectly, Section 5 of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77e, by, directly or indirectly, in the absence of any applicable exemption, and unless a registration statement is in effect as to a security:
- making use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise;
- carrying or causing to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after sale; or
- making use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, unless a registration statement has been filed with the Commission as to such security, or while the registration statement is the subject of a refusal order or stop order or (prior to the effective date of the registration statement) any public proceeding or examination under Section 8 of the Securities Act, 15 U.S.C. § 77h.
The SEC alleges that, from at least December 2017 to May 2018, Coinseed offered and sold digital assets called “CSD tokens” as securities to investors, in return for consideration worth at least $141,000. The defendants told investors that their investments would be used to develop Coinseed’s business, including a mobile phone application that purportedly enabled users to purchase and sell digital assets, and to pay other business expenses.
Also, the defendants offered and sold CSD tokens by promising that, in exchange for their investment, purchasers would receive a percentage of revenues that Coinseed generated in fees associated with the purchase and sale of digital assets on its platform.
The complaint says that the defendants offered and sold CSD tokens without registering the offering with the Commission as required by the federal securities laws, and no exemption from this registration requirement was available for the offering.
In connection with their offer and sale of CSD tokens, Coinseed never provided investors with the type of material information that issuers are required to include in registration statements when soliciting public investment. Instead, investors were left to rely only on the information the defendants chose to share about Coinseed and CSD tokens.
The SEC argues that Coinseed and Davaasambuu violated Sections 5(a) and (c) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77e(a), 77e(c)].