Brooklyn-based crypto firm Coin Cafe has been ordered by the attorney general’s office to pay back more than $4 million to cryptocurrency investors.
The restitution comes after investigations revealed that the company was charging exorbitant fees to users 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 was charging 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 to investors, but started charging fees for crypto storage in September. 2020 without informing customers.
Based on investigations, the company raised the charge four times, each higher than the previous charge. In October 2020, Coin Cafe achieved what the press release describes as the “most drastic fee structure”, where the platform charged users $99 in bitcoins per month if they did not trade or transfer no BTC on his site within a month.
Additionally, a client from New York paid $10,000 in fees in one month, while the crypto trading firm charged investors more fees of up to $51,000 over 13 months.
Subsequently, Coin Cafe’s exorbitant fees left investors’ accounts with nothing. According to an excerpt from the press release:
“In the end, Coin Cafe collected storage fees from over 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 to zero balance.
Coin Cafe will reduce wallet storage service to 0.002% per BTC
Meanwhile, Coin Cafe has reached an agreement with the New York Attorney General’s office to reimburse defrauded investors. Part of the deal will see the company repay $4.3 million to all affected investors, including $508,000 to more than 340 New York users.
Coin Cafe will also limit its wallet service fees to 0.002% per Bitcoin per month, with the company also being transparent about its fees for investors. Additionally, the crypto company will provide monthly updates to the Attorney General’s Office on the status of refunds.
According to a statement from New York Attorney General Letitia James,
“Coin Cafe has 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 crypto industry currency needs to be better regulated, like any other financial institution where New York investors put their hard-earned money.
Additionally, James’ office claimed that Coin Cafe had not registered as a commodity broker with the New York Attorney General’s Office as required by state law.
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