May 19, 2023 06:08 UTC
May 19, 2023 at 06:08 UTC
Coin Cafe will reimburse investors for $4.3M in fees that “wiped out” their Bitcoin accounts.
According to the complaint, the platform was charging investors “exorbitant and undisclosed fees,” with one user being charged $51,000 in recurring costs over the course of 13 months.
Coin Cafe, a cryptocurrency trading platform, was forced to pay back $4.3 million to its users after it was claimed that it had charged “exorbitant and undisclosed fees” for keeping Bitcoin, which caused some accounts to be completely depleted of their cash.
Brooklyn-based Coin Cafe submitted its original application to the New York State Department of Financial Services for a virtual currency license in July 2015, but it wasn’t accepted until January of this year.
It was permitted to operate during the seven and a half year application process, despite being marked as placing “investors at risk” due to its failure to comply with the requirement that all New York broker-dealers register with the Office of the Attorney General for New York.
On May 18, it was discovered that the exchange had been charging customers “exorbitant” fees for storing Bitcoin without properly disclosing this to them. As a result, some customers’ accounts were completely wiped out, according to Letitia James, attorney general of New York State.
James claimed in a statement that Coin Cafe cheated “hundreds of New Yorkers” out of thousands of dollars by regularly levying and raising “fees without properly informing investors.”
One New York investor paid more than $10,000 in fees in a single month, while another was charged costs totaling $51,000 over the course of 13 months. It was observed:
Despite advertising its wallet storage as “free” on its website, the corporation was charging investors exorbitant and secret fees to utilize it.
According to the inquiry conducted by the Office of the Attorney General (OAG), Coin Cafe modified the fee structure four times since September 2020 without “clearly informing investors of the increase.”
When investors started being paid a fee for inactivity in October 2022, this was the “most drastic fee structure change” that had ever taken place. It read:
“If an investor did not buy, sell, or transfer Bitcoin on the Coin Cafe site within 30 days, it charged investors the greater of 7.99 percent of the account or $99 worth of Bitcoin per month.”
In addition to criticizing the “deceptive marketing” involved, James cited the “lack of effective regulation” as a contributing cause.
This is yet another illustration of the necessity for tighter regulation of the bitcoin market, James said.
According to a settlement, Coin Cafe must reimburse all fees to investors in the United States who ask for a refund within the following 12 months.
The site must also inform all US-based users via email by May 23 if they qualify for a refund.
By the time this article was published, Cointelegraph had contacted Coin Cafe for a reaction, but had not heard back.