Customers of crypto savings app Coinseed say that the company has converted their deposits to Dogecoin without their consent and won’t process their withdrawals. Powerless and unable to reach the firm, the users of the New York-registered firm can do nothing but watch the crashing Dogecoin market, which tanked by 30% in the past week, wipe away their savings.
“This entire thing has made me pretty sick,” said Ace201613 on r/CoinseedSCAM, a subreddit that angry customers set up to log their fury and to coordinate a response. In a Facebook group of the same name, two customers report losses of over $100,000, and dozens for lesser sums. Incensed, around 50 Facebook users have expressed interest in a class-action lawsuit against Coinseed. A Coinseed spokesman could not be reached for comment.
The angry investors better get in line. In February, the US Securities and Exchange Commission and the New York Attorney General pressed charges against the firm for allegedly defrauding investors into buying a worthless token and lying about the expertise of its executives. The NYAG claimed Coinseed fraudulently took $1 million from investors in a token sale. Coinseed’s social media feeds have gone dark since the filings, and its app is no longer listed on Apple’s or Google’s app stores.
The New York Attorney General started receiving complaints about the allegedly errant conversions to other cryptocurrencies on April 16, legal documents filed by Coinseed’s counsel, Morrison Cohen, show.
Coinseed’s lawyers want out of the cases. In a declaration filed last week, Morrison Cohen said that Coinseed’s founders haven’t responded to its communications, delaying “important decisions” about the upcoming cases. Morrison Cohen announced its intention to cut ties with Coinseed on April 21. “It is clear that the attorney-client relationship has broken down irreparably,” wrote Jason Gottlieb, a partner for Morrison Cohen. Gottlieb declined to comment about the case to Decrypt.
Coinseed’s app had allowed customers to invest their spare change in cryptocurrencies. Customers could allocate their money to any of 17 cryptocurrencies or crypto lending protocols, and Coinseed was supposed to handle the investments. “We are looking to build a bridge for the masses to adopt crypto in the most seamless way,” it said in an earlier SEC filing.
It seemed to be a successful model; several customers on the r/CoinseedSCAM site reported tenfold increases to their portfolios. But the balance in their accounts ultimately means nothing if the proceeds can’t be withdrawn.
According to a 2019 annual report filed with the SEC, Coinseed was $92,537 in debt by March of that year.
The firm was founded in 2017 by two Mongolians who studied in New York: CEO Delgerdalai Davaasambu, who wrote the code and holds 80% of the shares in the company, and CFO Sukhbat Lkhagvadorj, who handled the finances and holds the other 20%. In SEC filings, Coinseed said that Lkhagvadorj has worked at “multiple Wall St. firms including a fixed income broker-dealer and an economic consulting firm focusing on analyzing securities.”
However, the NY attorney general said that Lkhagvadorj “had never traded securities or commodities.”
Neither co-founder could be reached by for comment. Morrison Cohen, the law firm that’s trying to get out of the case, thinks that Davaasambu returned to Ulaanbaatar, Mongolia. The lawyers indicated there was no forwarding address.
