The New York Attorney General’s Office has fined cryptocurrency exchange Coin Cafe $4.3 million for allegedly outrageous fee structures.
NY AG Fine Coin Cafe
The popular New York-based cryptocurrency platform allegedly charges its users exorbitant fees to use the platform. As a result, it was ordered to hand over retaliation and fines totaling $4.3 million.
New York State Attorney General Letitia James stated,
“Despite advertising its wallet storage as ‘free’ on its website, the company charged investors exorbitant and undisclosed fees to use its wallet storage.”
Additionally, the exchange has been accused of failing to disclose its fee structure and draining all of its client funds.
Fee restructuring drains client funds
The incident was first discovered when multiple customers were concerned that their Coin Cafe accounts would be depleted of funds. The allegations against the company have led to investigations into the company’s business practices and transparency of fees.
The investigation revealed that the company initially attracted customers by advertising its crypto wallet as a free product. However, since September 2022, the company has changed its fee structure many times and secretly increased prices without notifying customers, resulting in thousands of yuan in fees.
Beginning in October 2022, Coin Cafe has implemented a policy whereby users who have not made a cryptocurrency transaction within 30 days will be charged a monthly fee of 7.99% or $99, whichever is greater.
The Attorney General’s Office alleges that the exchange misled its customers and violated consumer protection regulations by failing to disclose these additional fees.
As a result of the investigation, Coin Cafe had to forfeit $4.3 million, which included restitution of $508,000 to 340 people and additional fines to New York State. Additionally, as part of the settlement, Coin Cafe is obliged to provide refunds to U.S. investors who demand repayment within the coming year. Coin Cafe has until May 23 to send an email notification to all U.S. customers that they are eligible for a refund.
Finally, the cryptocurrency exchange also promised to overhaul its fee structure and ensure transparency in its future operations.
this Attorney General claims that the incident highlights the need for Strengthen supervision Regulation in the cryptocurrency space, especially with regard to fee structures and consumer protection.
While the company has successfully obtained the state’s BitLicense in 2023, it has yet to officially register with the New York Attorney General’s Office, a requirement for companies trading in crypto in the state.
Furthermore, the fact that the company continued to overcharge customers even after obtaining the BitLicense shows that unfair practices can be carried out under the watchful eye of regulators.
Disclaimer: This article is for informational purposes only. It does not provide or be intended to be used as legal, tax, investment, financial or other advice.