According to the New York Attorney General’s office, a deal was made for the trading platform to reimburse investors for fees it overcharged.
Fast fact
- Currency exchange firm Coin Cafe has been ordered by OAG James to pay back $4.3M in overcharged fees.
- The AG seeks ‘nation-leading’ crypto industry regulations which would attempt to protect investors and add transparency.
Coin Cafe is a currency exchange firm that buys bitcoins in a friendly manner. The company allows individuals to purchase Bitcoins in person, by bank, money order, cashier’s check, wire transfer, Bitcoin ATM, and credit cards.
According to a Thursday announcement by the New York Attorney General’s office, the Brooklyn-based crypto trading platform is repaying $4.3 million to defrauded investors after misleading customers about “exorbitant and undisclosed” fees.
Letitia James, the Attorney General of New York, is urging the Legislature to pass what she considers to be nation-leading laws controlling the cryptocurrency business, with the goal of increasing transparency and protecting investors.
New York has a dual financial regulatory system, with the Attorney General’s office supervising security and commodities markets, as well as anti-fraud enforcement, and the DFS overseeing banks and bank-like products.
In 2015, DFS launched the BitLicense virtual currency program, the nation’s first state or federal crypto regulatory framework.
Coin Cafe applied for a BitLicense in 2015 and received approval in January 2023 while still operating. Broker-dealers with a BitLicense in New York must still register with the Attorney General’s office, which Coin Cafe did not do.
Before acquiring its BitLicense, Coin Cafe claimed to give investors free accounts and wallet storage to buy and retain Bitcoin, according to the Attorney General’s office. The corporation began charging users for its wallet service without alerting them in September 2020, increasing the amount four times.
In the most recent incident, which took effect in October 2022, investors were charged fees equal to 96% of their holdings, affecting over 300 New York consumers and wiping out hundreds of investor accounts. Meanwhile, Coin Cafe amassed hundreds of thousands of dollars in Bitcoin.
“Coin Cafe defrauded hundreds of New Yorkers out of thousands of dollars with its deceptive marketing and due to a lack of effective regulation,” said New York Attorney General Letitia James, in a statement. “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.”
Following the recent update, the attorney general has been cracking down on cryptocurrency registration violations and has filed multiple lawsuits against cryptocurrency companies.
“Rampant fraud and dysfunction have become the hallmarks of cryptocurrency and it is time to bring law and order to the multi-billion-dollar industry,” James said in a statement. “New York investors should have the peace of mind that there are safeguards in place to protect them and their money.”
James is preparing to present suggested legislation to state legislators. The measure is intended to prevent potential conflicts of interest, compel public disclosure of financial statements, and strengthen investor safeguards in the cryptocurrency industry.
According to the legal action, Coin Cafe will contact qualified consumers and begin refunding all fees to US-based investors who request a refund within the next 12 months.
Featured image: blackpast.org
