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Coin Cafe Asked to Return $4.3M in Fees, Resulting in Loss of Investors' Bitcoin Funds

Key Takeaways
  • Coin Cafe ordered to repay $4.3M to investors for excessive fees and loss of Bitcoin funds.
  • New York attorney general reveals undisclosed fees drained some investors' accounts.
  • Coin Cafe obligated to refund fees and notify eligible U.S. investors for refunds.
19-May-2023 By: Aditi Tiwari
Coin Cafe Asked to R

Cryptocurrency trading platform Coin Cafe has been ordered to repay $4.3 million to its users after being accused of charging "exorbitant and undisclosed fees" for storing Bitcoin. 

The New York attorney general revealed that some investors' accounts were completely drained due to these fees.

Coin Cafe, headquartered in Brooklyn, applied for a virtual currency license with the New York State Department of Financial Services in 2015, but it received approval for the license just recently in January.Throughout the lengthy application process, Coin Cafe was allowed to operate but was flagged as a risk to investors for failing to register with the Office of the Attorney General for New York, a requirement for all New York broker-dealers.

On May 18, it was disclosed that Coin Cafe had been charging excessive fees without properly informing investors. New York State Attorney General Letitia James stated that the platform defrauded "hundreds of New Yorkers" by routinely increasing fees without clear disclosure.

The investigation found instances where investors were charged exorbitant fees, leading to significant financial losses. One investor incurred fees exceeding $10,000 in a single month, while another was hit with fees totaling $51,000 over 13 months. Coin Cafe had marketed its wallet storage as "free" on its website, despite charging undisclosed fees.

Coin Cafe's Fee Changes and Deceptive Marketing Prompt Regulatory Concerns

Coin Cafe had changed its fee structure four times since September 2020 without adequately informing investors of the changes. The most significant fee adjustment occurred in October 2022, when investors were charged a fee for inactivity. If investors did not buy, sell, or transfer Bitcoin within 30 days, they were charged either 7.99 percent of their account value or $99 worth of Bitcoin per month.

New York Attorney General Letitia James criticized Coin Cafe for its deceptive marketing practices and highlighted the lack of effective regulation in the cryptocurrency industry as a contributing factor to such incidents. James emphasized the need for better regulation in the industry.

As part of the agreement, Coin Cafe is obligated to reimburse all fees to investors based in the United States who submit refund requests within the upcoming year.The platform is also obligated to notify eligible U.S.-based customers via email by May 23 regarding their eligibility for a refund.

Also read- US Crypto Lobby Highlights Threat of 'Rival Nations' Winning Blockchain Competition

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