According to the New York attorney general, the enterprise was charging investors “exorbitant and undisclosed fees,” with one user being charged $51,000 in total over the course of just 13 months.
Coin Cafe, a platform for trading cryptocurrencies, has been ordered to reimburse its customers for $4.3 million after claims that it charged excessive and hidden costs for storing bitcoins. According to reports, these fees led to the entire depletion of certain users’ accounts.
Brooklyn-based Coin Cafe first submitted a virtual currency license application to the New York State Department of Financial Services in 2015. But it took more than seven years before the license was approved; it was only granted in January of this year. The platform kept running throughout this time despite worries regarding investment protection.
Concerns regarding investor risk were exacerbated by Coin Cafe’s refusal to comply with the requirement that all New York broker-dealers register with the Office of the Attorney General for New York. The platform received a warning for failing to comply with this requirement, which might have helped assure transparency and legal compliance.
Unreported Fees Cause Account Drainage
On May 18th, Letitia James, the attorney general for the state of New York, disclosed that Coin Cafe had overcharged investors for Bitcoin storage without providing them with adequate notice. Some consumers experienced entire account depletion as a result of this lack of transparency, suffering large financial losses.
Due to the alleged misbehavior, Coin Cafe has been mandated to reimburse impacted customers $4.3 million. The ruling emphasizes the value of ethical and open business practices in the cryptocurrency sector by offering compensation to those who experienced financial harm as a result of the platform’s activities.
One New York investor incurred fees exceeding $10,000 in a single month, while another investor was hit with fees amounting to $51,000 over a span of 13 months. 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.”
In a settlement, Coin Cafe is required to refund all fees to U.S.-based investors who request a refund within the next year.
The platform is also obligated to notify all U.S-based customers of their eligibility for a refund via email by May 23.