Coin Cafe Repays $4.3 Million in Fees That ‘Wiped Out’ Investors’ Bitcoin Accounts

Cryptocurrency trading platform Coin Cafe has been ordered to pay back $4.3 million to its users after allegedly charging “exorbitant and undisclosed fees” for storing Bitcoin on the platform – leading to that some accounts were completely drained of their funds.

Brooklyn-based Coin Cafe initially applied for a virtual currency license to the New York State Department of Financial Services in July 2015, but was not approved until January of this year.

Despite the seven-and-a-half-year application process, it was allowed to continue operating throughout, but was flagged as a risk to “investors” because it violated its obligation to register with the New York Attorney General’s Office. Zeeland failed to comply. York – which all New York broker-dealers are required to do.

On May 18, it was revealed that the exchange had been charging investors “exorbitant” fees for investors to store Bitcoin without properly informing them, leading to some cases where investors’ accounts were completely wiped out, the attorney general said. of New York State, Letitia. James.

In a statement, James said Coin Cafe has scammed “hundreds of New Yorkers” out of thousands of dollars, routinely “charging and raising fees without properly informing investors.”

A New York investor earned more than $10,000 in fees in one month, while another investor was hit with fees of $51,000 over a 13-month period. It was noted:

“The company charged investors exorbitant and undisclosed fees to use its wallet storage despite marketing its wallet storage as ‘free’ on its website.”

The Office of the Attorney General’s (OAG) investigation found that Coin Cafe has changed its fee structure four times since September 2020, without ever “clearly notifying investors of the increase.”

This is another example of why my office has suggested common sense measures to regulate the cryptocurrency industry and protect people from fraud.

— NY AG James (@NewYorkStateAG) May 18, 2023

The “most drastic change to the fee structure” happened in October 2022, when investors had to pay a fee for inactivity. It stated:

“It charged investors the greater of 7.99 percent of the bill 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.”

James criticized the “misleading marketing” involved, but also highlighted the “lack of effective regulation” as a contributing factor.

“This is another example of why the cryptocurrency industry needs to be better regulated,” said James.

Related: US lawmakers view the EU and UK as examples of crypto regulation in joint hearing

In a settlement, Coin Cafe must refund all fees to US-based investors who request reimbursement within one year.

The platform is also required to notify all US-based customers by email of their right to a refund before May 23.

Cointelegraph reached out to Coin Cafe for comment, but received no response at time of publication.

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