Coin Café has been ordered to repay a sum of almost $4.3 million to its users after charging undisclosed fees for storing Bitcoin (BTC) on the platform. The undisclosed sum in discussion, later on, resulted in numerous accounts being completely drained of their funds. Coin Café initially filed an application for a virtual currency license with the New York State Department of Financial Services. The request was approved in January this year.
During the years-long application process, the platform was allowed to operate but was flagged for putting numerous investors at risk for failing to register with the Office of the Attorney General for New York. This registration is mandatory for all broker-dealers in New York.
On May 18, it had come to light that Coin Café had been charging unrealistic fees for storing Bitcoin on its platform. Based on a statement by Attorney General, Letitia James, it became understood that the platform defrauded New York-based investors by charging them routinely and increasing the fees without prior notice.
At the same time, the Attorney also stressed how events like these make it mandatory for crypto to be regulated as a whole. One investor had to face a fee of $10,000 within a month, whereas another investor had to deal with a fee of more than $51,000 over almost 13 months.
It was further stated,
“The company was charging investors exorbitant and undisclosed fees to use its wallet storage, despite marketing its wallet storage as ‘free’ on its website.”
It is alleged that Coin Café has pumped up the fee four times since September 2020 without informing investors.
Coin Café in Hot Waters
James’ office has been actively pushing state legislation and has been seeking increased authority in the digital assets sector, which is currently being handled by the New York Department of Financial Services. Now, the crypto community believes that new motions would be set in place that would greatly hinder the freedom of conducting business within the state.
In the recent settlement, Coin Café has been ordered to repay the entire sum to US-based investors within the upcoming 12 months. At the same time, the platform has also been asked to notify all of its US customers of their eligibility for the refund by May 23.