Coin Cafe Ordered to Repay $4.3M in Fees that ‘Wiped Out’ Investors’ Bitcoin Accounts
Cryptocurrency trading platform Coin Cafe has been ordered to repay $4.3 million to its users after allegedly charging “exorbitant and undisclosed fees” for storing Bitcoin on the platform, which resulted in some accounts being drained entirely of their funds.
Based in Brooklyn, Coin Cafe initially filed an application for a virtual currency license with the New York State Department of Financial Services in July 2015. However, it was only approved in January of this year.
Despite the lengthy seven-and-a-half-year application process, Coin Cafe was allowed to operate but was flagged for putting investors at risk. The platform failed to fulfill its obligation to register with the Office of the Attorney General for New York, which is required for all New York broker-dealers.
Exorbitant Fees Lead to Investor Losses
On May 18, New York State Attorney General Letitia James revealed that Coin Cafe had been charging “exorbitant” fees for storing Bitcoin without properly informing investors. This resulted in some investors’ accounts being completely wiped out.
In a statement, James stated that Coin Cafe defrauded “hundreds of New Yorkers” out of thousands of dollars by routinely charging and increasing fees without properly informing investors.
Examples of the excessive fees included one New York investor incurring fees exceeding $10,000 in a single month and another investor being hit with fees amounting to $51,000 over a span of 13 months. Coin Cafe had marketed its wallet storage as “free” on its website while charging undisclosed fees.
The Office of the Attorney General’s investigation revealed that Coin Cafe had changed its fee structure four times since September 2020 without clearly notifying investors of the increases.
Settlement and Refunds
As part of a settlement, Coin Cafe is now 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.
Cointelegraph reached out to Coin Cafe for comment but did not receive a response by the time of publication.