According to the complaint, the platform charges investors “exorbitant and undisclosed fees”, with one user being charged $51,000 in recurring fees over 13 months.
Coin Cafe, a cryptocurrency trading platform, was forced to pay back $4.3 million to its users after it was claimed to have charged “exorbitant and undisclosed fees” to store Bitcoins, which caused some accounts to literally run out of 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 was not accepted until January this year.
It was allowed to operate during its seven-and-a-half year application process, despite being marked as an “investor at risk” for its failure to meet the requirement that all New York broker-dealers register with the Attorney General’s Office for New York.
On May 18, it became known that the exchange had been charging customers “exorbitant” fees for storing Bitcoins without properly disclosing them to them. As a result, some customers’ accounts were completely wiped out, according to Letitia James, Attorney General for the State of New York.
James claimed in a statement that Coin Cafe defrauded “hundreds of New Yorkers” out of thousands of dollars by regularly charging and inflating “fees without properly notifying investors.”
One New York investor paid fees over $10,000 in one month, while another was charged $51,000 over 13 months. It is observed:
Despite advertising its wallet storage as “free” on its website, the company charges investors exorbitant and secret fees to use it.
According to an investigation conducted by the Office of the Attorney General (OAG), Coin Cafe changed its fee structure four times since September 2020 without “notifying investors clearly of the increase.”
When investors began paying inactivity fees in October 2022, it was the “most drastic fee structure change” ever. it read:
“If an investor does not buy, sell, or transfer Bitcoin on the Coin Cafe site within 30 days, the investor will be charged a higher fee of 7.99 percent of the account or $99 worth of Bitcoin per month.”
As well as criticizing “deceptive marketing”, James cited a “lack of effective regulation” as a contributing cause.
This is another illustration of the need for tighter regulation of the bitcoin market, said James.
According to the settlement, Coin Cafe must reimburse all fees to investors in the United States who request a refund within the next 12 months.
Sites must also notify all US-based users by email by May 23 if they are eligible for a refund.
At the time this article was published, Cointelegraph had reached out to Coin Cafe for feedback, but have yet to receive a response.
Pos Coin Cafe will reimburse investors for $4.3 million who “delete” their Bitcoin accounts. first appeared on BTC Wires.