Cryptocurrency trading platform Coin Cafe has been ordered to pay back $4.3 million to its users after it allegedly charged “exorbitant and undisclosed fees” for storing bitcoin on the platform – leading to some accounts being completely drained of their funds.
Headquartered in Brooklyn, Coin Cafe initially applied for a virtual currency license with the New York State Department of Financial Services in July 2015; However, it was only approved in January this year.
Despite an application process that lasted seven and a half years, Coin Cafe was allowed to operate the entire time but was flagged as putting “investors at risk,” since it did not maintain its commitment to register with the New York Attorney General’s Office – which all brokers are required to New York brokers do this.
In a statement, James said tCoin Cafe defrauded “hundreds of New Yorkers” out of thousands of dollars, routinely charging and increasing “fees without properly informing investors.”
One New York investor incurred fees of over $10,000 in one month, while another had fees of up to $51,000 over 13 months. Noted:
“The company has been charging investors exorbitant and undisclosed fees for using wallet storage, despite marketing its wallet storage as ‘free’ on its website.”
The OTP investigation revealed that Coin Cafe has changed its fee structure four times since September 2020, without “clearly informing investors of the increase.”
The “most drastic change to the fee structure” occurred in October 2022, when investors were charged for inactivity. It says:
“It charged investors 7.99 percent of the account or $99 worth of bitcoin per month if the investor does not buy, sell or transfer bitcoin on Coin Cafe within 30 days.”
James criticized the “deceptive marketing” involved, but also highlighted a “lack of effective regulation” as a contributing factor.
“This is another example of why the cryptocurrency industry needs better regulation,” James stated.
Related: US lawmakers consider the European Union and the United Kingdom two examples of regulating crypto in a joint hearing
In the settlement, Coin Cafe is required to refund all fees to US-based investors who request refunds within the next year.
The platform is also required to notify all US-based customers of their eligibility for a refund via email by May 23rd.
Cointelegraph has reached out to Coin Cafe for comment but had not received a response by the time of publication.
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