The United States Securities and Exchange Commission (SEC) has filed a complaint against Coinseed, Inc. and its founder and chief executive officer Delgerdalai Davaasambuu.

The complaint, submitted today at the New York Southern District Court, 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)].

The Commission seeks a final judgment:

• permanently enjoining the defendants from violating Sections 5(a) and 5(c) of the Securities Act, pursuant to Section 20(b) of the Securities Act
• ordering the defendants to disgorge their ill-gotten gains with prejudgment interest thereon, pursuant to Section 21(d)(5) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78u(d)(5)] and Sections 6501(a)(1) and (a)(3) of the National Defense Authorization Act for Fiscal Year 2021, Pub. L. No. 116-283, to be codified at 15 U.S.C. §§ 78u(d)(3) and 78u(d)(7);
• prohibiting the defendants from participating, directly or indirectly, in any offering of digital asset securities, provided, however, that such injunction shall not prevent Davaasambuu from purchasing or selling digital asset securities for his own personal account, pursuant to Sections 21(d)(5) of the Exchange Act [15 U.S.C. § 78u(d)(5)];
• ordering the defendants to pay civil money penalties, pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)]; and
• ordering any other and further relief the Court may deem just and proper.