Brooklyn-based crypto firm Coin Cafe has been ordered by the office of the Attorney General to refund over $4 million to cryptocurrency investors.
The restitution comes after investigations revealed that the company charged users exorbitant fees without their consent.
“Free” but not Free
In a press release on May 18, the New York Attorney General’s office claimed that Coin Cafe charged investors high fees to store bitcoin with the company’s wallet, despite advertising the service as “free” on their website.
Coin Cafe, which recently received approval for a virtual currency license from the New York State Department of Financial Services (DFS) in January 2023, also known as BitLicense, claimed to offer free storage services for investors but started charging fees for crypto storage in September 2020 without informing customers.
Based on investigations, the company increased the fee four different times, each one higher than the previous charge. In October 2020, Coin Cafe carried out what the press release described as the “most drastic fee structure,” where the platform charged users $99 in bitcoin monthly if they did not trade or transfer BTC on its site within one month.
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Also, one New York customer paid $10,000 in fees in one month, while the crypto trading company charged more investor fees of up to $51,000 over 13 months.
Subsequently, Coin Cafe’s exorbitant charges left investors’ accounts with nothing. According to a statement from the press release:
“Ultimately, Coin Cafe took storage fees from more than 300 New York investors. Coin Cafe took hundreds of thousands of dollars worth of Bitcoin from its investors and completely wiped out hundreds of investor accounts down to a zero balance.”
Coin Cafe to Reduce Wallet Storage Service to 0.002% per BTC
Meanwhile, Coin Cafe entered an agreement with the New York Attorney General’s office to refund defrauded investors. Part of the agreement will see the firm pay back $4.3 million to all affected investors, which includes $508,000 to over 340 New York users.
Coin Cafe will also limit fees for its wallet service to 0.002 percent per Bitcoin monthly, with the company also being transparent about its fees to investors. In addition, the crypto firm will provide monthly updates to the Office of the Attorney General about the status of the refunds.
According to a statement from the New York Attorney General Letitia James,
“Coin Cafe defrauded hundreds of New Yorkers out of thousands of dollars with its deceptive marketing and due to a lack of effective regulation. This is yet another example of why the cryptocurrency industry needs to be better regulated, just like any other financial institution where New York investors put their hard-earned money.”
Also, James’ office claimed that Coin Cafe did not register as a commodity dealer-broker with the New York Attorney General’s office, as required by the state’s law.
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