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Brooklyn-based cryptocurrency firm Coin Cafe has been ordered by the New York Attorney General’s office to refund over $4 million to investors.
The restitution follows investigations revealing that the company charged users exorbitant fees for cryptocurrency storage without their consent.
“Free” Storage, Hidden Costs
In a press release issued on May 18, the New York Attorney General’s office stated that Coin Cafe charged investors high fees to store Bitcoin in its wallet, despite advertising the service as “free” on its website.
Coin Cafe, which received a virtual currency license from the New York State Department of Financial Services (DFS), also known as a BitLicense, in January 2023, claimed to offer free storage services. However, the company began charging fees for crypto storage in September 2020 without informing customers.
Investigations showed that the company increased fees four times, with each increase being higher than the previous one. In October 2020, Coin Cafe implemented what the press release described as the “most drastic fee structure,” charging users $99 in Bitcoin monthly if they did not trade or transfer BTC on the site within a month.
One New York customer paid $10,000 in fees in a single month, while the company charged another investor up to $51,000 in fees over 13 months.
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These exorbitant charges left many investors’ accounts depleted. According to the press release:
“Ultimately, Coin Cafe took storage fees from more than 300 New York investors. Coin Cafe took hundreds of thousands of dollars worth of Bitcoin from its investors and completely wiped out hundreds of investor accounts down to a zero balance.”
Coin Cafe to Cap Wallet Storage Fees
Coin Cafe entered into an agreement with the New York Attorney General’s office to refund defrauded investors. As part of the agreement, the firm will pay back $4.3 million to all affected investors, including $508,000 to over 340 New York users.
The company will also limit fees for its wallet service to 0.002 percent per Bitcoin monthly and improve transparency regarding its fees. Additionally, Coin Cafe will provide monthly updates to the Attorney General’s office regarding the status of the refunds.
New York Attorney General Letitia James stated:
“Coin Cafe defrauded hundreds of New Yorkers out of thousands of dollars with its deceptive marketing and due to a lack of effective regulation. This is yet another example of why the cryptocurrency industry needs to be better regulated, just like any other financial institution where New York investors put their hard-earned money.”
The Attorney General’s office also noted that Coin Cafe failed to register as a commodity dealer-broker with the state, as required by New York law.
