The cryptocurrency trading platform Coin Cafe has been ordered to refund $4.3 million to its users after allegedly charging “exorbitant and undisclosed fees” for storing bitcoin on the platform, causing some accounts to be completely emptied of their funds..
Based in Brooklyn, Coin Cafe initially filed a virtual currency license application with the New York State Department of Financial Services in July 2015; however, it was not approved until January of this year.
Despite the seven and a half year application process, Coin Cafe was allowed to operate for that entire time, but was flagged for putting “investors at risk”as it failed to comply with its obligation to register with the New York Attorney General’s Office, which all intermediaries in New York are required to do.
On May 18, it was revealed that the claimant had been charging “exorbitant” fees for storing bitcoin without properly informing investors.leading to some cases where investor accounts were wiped out entirely, according to New York State Attorney General Letitia James.
It’s a statement, James claimed that Coin Cafe defrauded “hundreds of New Yorkers” out of thousands of dollars, routinely charging and increasing “commissions without adequately informing investors.”.
One New York investor incurred fees in excess of $10,000 in a single month, while another investor was hit with fees of $51,000 over a 13-month span. It was noted:
“The company was charging investors exorbitant and undisclosed fees to use its wallet storage, despite marketing its wallet storage as “free” on its website.”
The investigation by the Attorney General’s Office revealed that Coin Cafe changed the fee structure four times since September 2020, without ever “clearly informing investors of the increase”.
This is another example of why my office proposed commonsense measures to regulate the cryptocurrency industry and protect people from fraud. https://t.co/G5XkasCfhA
—NY AG James (@NewYorkStateAG) May 18, 2023
This is another example of why my office proposed common sense measures to regulate the cryptocurrency industry and protect people from fraud. https://t.co/G5XkasCfhA
The “most drastic change in the fee structure” occurred in October 2022, when investors were charged an inactivity fee. It stated:
“It charged investors the greater of the following amounts: 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.”
James criticized the “misleading marketing” involved, but also highlighted the “lack of effective regulation” as a contributing factor.
“This is one more example of why the cryptocurrency industry needs to be better regulated,” James stated..
In an agreement, Coin Cafe is required to refund all fees to US-based investors who request a refund within the next year..
The platform is also required to notify all US-based customers of their eligibility for a refund via email by May 23..
Cointelegraph reached out to Coin Cafe for comment on the situation, but did not hear back by press time.
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