The New York Attorney General’s office has slapped a $4.3 million fine on the crypto exchange Coin Cafe due to its allegedly outrageous fee structure.
NY AG Fines Coin CafeThe New York-based popular cryptocurrency platform has been allegedly charging its users exorbitant fees for using the platform. As a result, it has been ordered to hand over a total of $4.3 million in retribution and fine.
The New York State Attorney General, Letitia James, noted that
“The company was charging investors exorbitant and undisclosed fees to use its wallet storage, despite marketing its wallet storage as ‘free’ on its website.”
Furthermore, the exchange has also been accused of not disclosing the fee structure and draining out entire customer funds.
The matter was first uncovered when multiple customers raised concerns about depleting funds from their Coin Cafe accounts. These allegations against the firm led to an investigation into the company’s business practices and fee transparency.
The investigation revealed that the firm had initially onboarded clients advertising its crypto wallet as a free product. However, since September 2022, the company changed its fee structure multiple times and surreptitiously added fees without informing customers, which resulted in charges of thousands of dollars.
Starting in October 2022, Coin Cafe implemented a policy where users who did not engage in cryptocurrency transactions within a 30-day period were subject to a charge of either 7.99% or $99 per month, whichever amount was higher.
The Attorney General’s office claimed that the exchange misled its customers and violated consumer protection regulations by failing to disclose these additional charges.
The Settlement AgreementAs a consequence of the investigation, Coin Cafe has had to surrender $4.3 million, which includes restitution of $508,000 to 340 individuals and an additional penalty to the state of New York. Additionally, as part of the settlement agreement, Coin Cafe is obliged to provide refunds to U.S.-based investors who request reimbursement within the upcoming year. By May 23, Coin Cafe must send email notifications to all U.S.-based customers, informing them of their eligibility for a refund.
Finally, The cryptocurrency exchange has also committed to implementing comprehensive changes to its fee structure and ensuring transparency in its operations going forward.
Need For Transparency?The Attorney General has claimed that the incident highlights the need for increased regulation and oversight in the cryptocurrency sector, especially regarding fee structures and consumer protection.
Although the company had successfully obtained the state’s BitLicense in 2023, it had not officially registered with the New York Attorney General’s office, which is a requirement for companies dealing with crypto trading in the state.
Plus, the fact that the company continued to overcharge customers even after obtaining the BitLicense indicates that unfair practices can be conducted right under the nose of the regulatory bodies.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
