Cryptocurrency buying and selling platform Coin Cafe has been ordered to repay $4.3 million to its customers after allegedly charging “exorbitant and undisclosed charges” for storing Bitcoin on the platform — resulting in some accounts being drained totally of its funds.
Primarily based in Brooklyn, Coin Cafe initially filed an utility for a digital foreign money license with the New York State Division of Monetary Companies in July 2015, nevertheless, was solely accredited in January this yr.
Regardless of the seven-and-a-half-year utility course of, it was allowed to function all through however was flagged as placing “traders in danger,” because it didn’t uphold its obligation to register with the Workplace of the Legal professional Normal for New York – which all New York broker-dealers are required to take action.
On Could 18, it was revealed that the trade had been charging traders “exorbitant” charges for traders to retailer Bitcoin with out correctly informing them, resulting in some instances during which traders’ accounts had been worn out totally, in keeping with New York State Legal professional Normal Letitia James.
In a press release, James stated Coin Cafe defrauded “a whole lot of New Yorkers” out of hundreds of {dollars}, routinely charging and growing “charges with out correctly informing traders.”
One New York investor incurred charges exceeding $10,000 in a single month, whereas one other investor was hit with charges amounting to $51,000 over a span of 13 months. It was famous:
“The corporate was charging traders exorbitant and undisclosed charges to make use of its pockets storage, regardless of advertising and marketing its pockets storage as “free” on its web site.”
The Workplace of the Legal professional Normal’s (OAG) investigation revealed that Coin Cafe modified the charge construction 4 occasions since September 2020, with out ever “clearly telling traders of the rise.”
That is one other instance of why my workplace proposed commonsense measures to manage the cryptocurrency trade and shield folks from fraud.https://t.co/G5XkasCfhA
— NY AG James (@NewYorkStateAG) May 18, 2023
The “most drastic charge construction change” occurred in October 2022 when traders had been charged a charge for inactivity. It acknowledged:
“It charged traders the higher of seven.99 p.c of the account or $99 value of Bitcoin monthly if an investor didn’t purchase, promote, or switch Bitcoin on the Coin Cafe website inside 30 days.”
James criticized the “misleading advertising and marketing” concerned, but additionally highlighted the “lack of efficient regulation” as a contributing issue.
“That is yet one more instance of why the cryptocurrency trade must be higher regulated,” James acknowledged.
Associated: US lawmakers maintain EU and UK as examples of crypto regulation in joint listening to
In a settlement, Coin Cafe is required to refund all charges to U.S.-based traders who request a refund throughout the subsequent yr.
The platform can be obligated to inform all U.S-based prospects of their eligibility for a refund through electronic mail by Could 23.
Cointelegraph reached out to Coin Cafe for remark however didn’t obtain a response by the point of publication.
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