- Coin Cafe will reimburse investors $4.3 million, including $508,000 for 340 people in New York.
- The exchange was found to have been collecting “exorbitant” fees for holding Bitcoin without properly informing clients.
After reportedly charging “exorbitant and undisclosed fees” for holding Bitcoin on the platform, which resulted in some accounts being entirely emptied of their assets, cryptocurrency trading company Coin Cafe has been ordered to reimburse its users $4.3 million.
The Brooklyn-based Coin Cafe first submitted a virtual currency license application to the New York State Department of Financial Services in July 2015; however, the application wasn’t granted until January of this year.
Coin Cafe was permitted to operate throughout the entire seven-and-a-half-year application process, despite being flagged as putting “investors at risk” due to its failure to comply with the requirement that all New York broker-dealers register with the Office of the Attorney General for New York.
According to New York State Attorney General Letitia James, the exchange was found to have been collecting “exorbitant” fees for holding Bitcoin without properly informing clients. As a result, in some instances, investors’ accounts were utterly wiped out.
According to a statement by James, Coin Cafe consistently increased fees without adequately informing investors, defrauding several hundred New Yorkers out of thousands of dollars. One New York investor paid more than $10,000 in fees in a single month, while another was charged costs totaling $51,000 over the course of 13 months. It was observed:
“The company was charging investors exorbitant and undisclosed fees to use its wallet storage, despite marketing its wallet storage as ‘free’ on its website.”
According to the inquiry conducted by the Office of the Attorney General, Coin Cafe modified the fee structure four times since September 2020 without clearly informing investors of the increase. When investors started being paid a fee for inactivity in October 2022, this was the “most drastic fee structure change” that had ever occurred. It read:
“It charged investors more than 7.99 percent of the account or $99 worth of Bitcoin per month if an investor did not buy, sell, or transfer Bitcoin on the Coin Cafe site within 30 days.”
Coin Cafe successfully got the state’s BitLicense in 2023, but even after getting the license, it kept charging its customers a lot of money. Additionally, the business did not register with the New York Attorney General’s office as required by law, as it should have done.
Coin Cafe has agreed to compensate investors, including paying 340 people in the state of New York $508,000 as part of the settlement. The business will continue, but it must keep its monthly fees to 0.002% and fully disclose all fees to users.
Letitia James, the attorney general for the state of New York, criticized Coin Cafe’s methods and cited this case as “another example of why the cryptocurrency industry needs to be better regulated.” Additionally included in this announcement was James’ most recent proposal for crypto-specific regulation, which might result in more enforcement.
Investors in the United States who ask for a refund during the next year must receive a total return from Coin Cafe. The site must also inform all US-based users via email by May 23 if they qualify for a refund.