The Securities and Exchange Commission (SEC) has secured a Court order imposing penalties on Coinseed and its founder and chief executive Delgerdalai Davaasambuu.

On July 5, 2023, Judge Paul G. Gardephe of the New York Southern District Court entered an order directing the defendants to disgorge $141,410 plus pre-judgment interest. Also, each defendant must pay a civil monetary penalty of $141,410.

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 argued 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)].