Coin Cafe, a Brooklyn-based crypto company, charged $4.3 million in “exorbitant and undisclosed fees” on a currency storage service it marketed as “free,” according to a settlement reached Wednesday with the state attorney general.
Coin Cafe allows investors to buy, sell and store Bitcoin in “wallets” or digital accounts — a service the company previously described as free, according to New York Attorney General Letitia James’ office. But Coin Cafe started charging consumers for using these wallets in September 2020 without proper notice, according to James.
Her team said the fees were so high that they wiped out the balance in more than half of 345 accounts held by New Yorkers, and in one case, amounted to more than $10,000 in a single month. More than 75 Long Islanders were impacted, according to the attorney general’s office.
“Coin Cafe defrauded hundreds of New Yorkers out of thousands of dollars with its deceptive marketing and due to a lack of effective regulation,” James said in a news release. “This is yet another example of why the cryptocurrency industry needs to be better regulated …”
Coin Cafe didn’t respond to requests for comment.
The settlement states that Coin Cafe should have registered with James’ office as a commodity broker-dealer in 2014, but never did. Years later, Coin Cafe started charging fees on accounts that were inactive for certain periods of time — rates the firm then raised multiple times, according to the agreement.
Coin Cafe sent emails with subject lines about its terms of service changing and alerting investors that they should login to keep their accounts free, the settlement said. But these messages didn’t disclose the specific amounts investors would be charged, according to James.
In all, Coin Cafe collected about $4.3 million in fees from investors, James’ office said. Nearly $509,000 in restitution for New Yorkers will be distributed through the state, while investors outside New York should get emails notifying them that they’re entitled to refunds.
The company also agreed to charge no more than .002% per Bitcoin in monthly storage over the next five years, the settlement said. What that amounts to in dollars and cents must be disclosed on Coin Cafe’s website.