NY Attorney General claims Coin Cafe defrauded “hundreds of New Yorkers.”
Coin Cafe, a Brooklyn-based cryptocurrency platform, has been ordered to pay $4.3 million due to its deceptive fee practices.
It is believed that the company’s high and hidden fees led to the clearing out of some Bitcoin accounts, which is a hard blow for those who entrusted their digital assets to this platform.
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The company first applied for a virtual currency license from the New York State Department of Financial Services in 2015 but only received approval early this year.
The exposé of Coin Cafe’s egregious practices came on May 18th.
The company was found to be charging “exorbitant,” undisclosed fees for Bitcoin storage. Some investors even saw their accounts completely drained due to these fees.
According to New York State Attorney General Letitia James, Coin Cafe had wronged “hundreds of New Yorkers” by continually ramping up fees without adequate disclosure.
Further investigations revealed that Coin Cafe had changed its fee structure four times since September 2020 without clearly communicating these changes to investors. One particularly shocking instance was in October 2022 when investors were suddenly billed for inactivity.
James highlighted the “deceptive marketing” tactics of Coin Cafe and pointed to the “lack of effective regulation” as a significant contributing factor to the situation. She underlined the need for better regulation in the cryptocurrency industry.
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 positive turn of events, Coin Cafe will be required to refund all fees to US-based investors who request it within the next year as part of a settlement agreement. They will also need to inform all US-based customers about their eligibility for a refund by May 23rd.
This ordeal underscores the urgent need for more stringent regulation and transparency in the cryptocurrency sector. The situation highlights that the pursuit of profits should never come at the cost of transparency and the trust of investors.
In other news, New York Attorney General’s office seeks to expand its powers to regulate the crypto industry.