Cryptocurrency trading platform Coin Cafe has been ordered to repay its users $4.3 million for allegedly charging “exorbitant and undisclosed fees” for storing bitcoin on the platform — causing some accounts to be completely drained of funds.
Brooklyn-based Coin Cafe originally filed an application for a virtual currency license with the New York State Department of Financial Services in July 2015; however, it was not approved until January of this year.
Despite a seven-and-a-half-year application process, Coin Cafe was allowed to operate throughout, but was flagged as putting “investors at risk” because it failed its obligation to register with the Office of the Attorney General New York — All New York broker-dealers are required to do this. According to New York State Attorney General Letitia James, on May 18, it was revealed that the exchange charged “exorbitant” fees for storing Bitcoin without properly informing investors, resulting in investors' losses in some cases. The account was completely emptied. James said in a statement that tCoin Cafe defrauded "hundreds of New Yorkers" out of thousands of dollars and regularly charged and increased "fees" without properly informing investors.
One New York investor paid more than $10,000 in fees in one month, while another paid a total of $51,000 in fees over 13 months. It was pointed out: "Despite advertising its wallet storage as 'free' on its website, the company charged investors Exorbitant and undisclosed fees to use its wallet storage."
The Attorney General's Office investigation revealed that Coin Cafe changed its fee structure four times since September 2020, but never "clearly informed investors of the increased fee." The "most drastic fee structure change" will occur in October 2022, when investors will be charged fees for inactivity. it says:
“If an investor does not buy, sell or transfer Bitcoin on the Coin Cafe website within 30 days, it charges the investor 7.99% of the account amount or $99 per month in Bitcoin, whichever is greater.” James criticized the "deceptive marketing" involved, but also highlighted a "lack of effective regulation" as a contributing factor.
"This is yet another example of why the cryptocurrency industry needs better regulation," James said. As part of the settlement, Coin Cafe must refund all fees to US investors who claim refunds over the next year. The platform is also obliged to notify all US customers by email of their eligibility for refunds by May 23.
