Cryptocurrency platform Coin Cafe, accused of defrauding investors through fees, will pay $4.3 million under an agreement with the New York State Attorney General’s Office.
This is another example of why my office proposed commonsense measures to regulate the cryptocurrency industry and protect people from fraud.https://t.co/G5XkasCfhA
— NY AG James (@NewYorkStateAG) May 18, 2023
The Brooklyn-based company charged “exorbitant fees” for storing bitcoin without properly informing customers, the agency said. In some cases, this led to the depletion of investors’ accounts.
One of them paid a commission in excess of $10,000 in a month, the other paid $51,000 over 13 months. At the same time, the service was advertised as free on the platform website.
Coin Cafe initially applied for a license to provide cryptocurrency-related services in NYDFS in July 2015, but it was approved only in January 2023. Despite this, the companies were allowed to work with the indication that, in the absence of a license, it puts investors at risk.
Since September 2020, Coin Cafe has changed the size of commissions four times, never “clearly notifying investors of their increase,” the Prosecutor General’s Office noted. In addition, from October 2022, the company began to charge for inactivity.
“If an investor did not buy, sell or transfer bitcoins on the Coin Cafe website within 30 days, they were charged more than 7.99% of the total account balance or $99 in bitcoins every month,” the department said.
In the settlement agreement, the platform committed to fully refund fees during 2024. She must also notify customers of their eligibility by email by May 23rd.
Recall that in early May, the NYDFS fined Bitcoin exchange bitFlyer USA $1.2 million for non-compliance with state cybersecurity requirements.
Earlier, the New York Attorney General’s Office demanded to expand its powers to regulate the crypto industry.
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