Brooklyn-based crypto trading platform Coin Cafe is paying back $4.3 million to defrauded investors, according to a Thursday statement from the New York Attorney General’s office, which accused the company of misleading customers about “exorbitant and undisclosed” fees.
The company, granted a New York BitLicense in January 2023, had advertised free wallet storage on its website, but it charged fees that sometimes entirely emptied investors’ accounts, the investigation concluded. In an agreement with the state, Coin Cafe is paying back those harmed, including 340 investors in New York.
“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.”
James’ office has been pushing state legislation seeking much more authority in the digital assets industry, which is currently handled primarily by the New York Department of Financial Services. Crypto insiders fear the new measures will make it much more difficult to do business in the state.
Coin Cafe customers who want the refunds must request them in the next 12 months.
The platform also illegally failed to register with the attorney general as a commodity broker-dealer, according to the agreement dated Thursday. The attorney general has recently been cracking down on crypto registration violations.
Coin Cafe did not immediately return requests for comment sent to company email addresses.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.