Cryptocurrency Platforms and Backers Targeted over Allegedly Deceptive Conduct

  • New York AG Letitia James sued cryptocurrency trading platform Coinseed, Inc. and its two top executives (collectively “Coinseed”) over allegations that it operated illegally and defrauded investors in violation of New York’s Martin Act.
  • The complaint alleges that Coinseed raised funds in an unregistered securities offering and deceived investors with false claims about its staff’s expertise and experience. The complaint seeks restitution, disgorgement, and injunctive relief.
  • AG James also reached a settlement with iFinex Inc., the operator of cryptocurrency platform Bitfinex, and related companies (collectively “Bitfinex”) and with the issuer of a cryptocurrency called “tether,” Tether Holdings Limited, and related companies (collectively “Tether”) to resolve allegations that Bitfinex and Tether made false statements to investors in violation of New York’s Martin Act.
  • According to the settlement agreement with Bitfinex and Tether, the AG’s office’s investigation found that the companies allegedly promoted “tether” as a stablecoin – a cryptocurrency backed by real-dollar reserves – even though Tether had no access to banking and at times held no reserves to back “tethers” in circulation. In addition, Bitfinex allegedly hid massive losses and misled its clients and the market regarding its liquidity problems.
  • Under the terms of the settlement agreement, among other things, Bitfinex and Tether will pay $18.5 million in penalties to the state. Bitfinex and Tether are also banned from any trading activities with New Yorkers and are required to report their efforts to exclude New Yorkers from their trading activities.