Some versions of coco that are sterilized end up loaded with salts. So if you have that type, definitely soak and rinse it well before use.

But damping off is too much water. Period. If you use paper towel method, get them out paper towel as soon as the the first tip appears, less than 1/4 inch long. That is often where the trouble starts. An extra 12 hours in paper towels and those seeds are potentially a problem. Then try letting them dry out around day 4 or 5, once you have a true set of leaves. If you water every two days, skip one more day but watch for wilting. It doesn't have to get really dry, just skip a day around the 4th or 5th day after emergence. If that does not work, treat them with a fungicide before germinating and handle them cleanly.