Coin Cafe to pay $4.3m to settle with NY AG over investor deception

The cryptocurrency platform Coin Cafe, accused of deceiving 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

According to the department, the Brooklyn-based company charged “unreasonable fees” for holding bitcoins without properly informing customers. In some cases this led to investors’ accounts being depleted.

One investor paid a fee exceeding $10,000 in a month, another $51,000 over 13 months. Meanwhile, the platform’s site advertised the service as free.

Coin Cafe initially applied for a license to provide crypto-related services with the NYDFS in July 2015, but it was approved only in January 2023. Regardless, the company was allowed to operate with the caveat that, in the absence of a license, it exposed investors to risk.

Starting in September 2020, Coin Cafe changed fee amounts four times, never clearly notifying investors of increases, the Attorney General’s Office noted. In addition, from October 2022 the company began charging inactivity fees.

“If an investor did not buy, sell, or transfer bitcoins on Coin Cafe’s site for 30 days, they were charged monthly more than 7.99% of the total account balance or $99 in bitcoins,” the department said.

Under the settlement, the platform has agreed to fully reimburse the fee amounts within 2024. It must also notify customers by email of their right to compensation by May 23.

Earlier in May, the NYDFS fined the bitcoin exchange BitFlyer USA $1.2 million for failing to meet state cybersecurity requirements.

Earlier, the New York Attorney General called to expand its powers to regulate the crypto industry.