The Office of the New York Attorney General took action against Coin Cafe, a crypto company that charged extremely high fees to wallet users. The company advertised its wallet service as free and did not inform users of its actual fee structure, resulting in New York residents being charged tens of thousands of dollars in fees. Furthermore, Coin Cafe depleted certain user account balances entirely, which led to the company surrendering $4.3 million in restitution to investors.
Coin Cafe’s Fee Structure Changes and License
Coin Cafe changed its fee structure four times, and in October 2022, it introduced a high fee increase of 7.99% or $99 per month if users did not transact crypto over a 30-day period. Despite acquiring the state’s BitLicense in 2023, Coin Cafe continued to charge overly high fees, and it failed to register with the New York Attorney General’s office. As a result, the company will now be allowed to continue operating but must limit monthly fees to 0.002% and must adequately inform users of all fees.
Restitution and Proposed Regulations
As part of the settlement agreement, Coin Cafe will pay $508,000 to 340 individuals in the state of New York. However, unlike other companies targeted by the New York Attorney General, Coin Cafe successfully obtained the state’s BitLicense. New York Attorney General Letitia James called Coin Cafe’s actions “another example of why the cryptocurrency industry needs to be better regulated.” James has recently proposed crypto-specific regulation that could lead to further enforcement.
Coin Cafe’s misleading advertising and high fees are a warning to the cryptocurrency industry that regulation is necessary to protect consumers. While obtaining a BitLicense is essential, it is not enough, and companies must register with the New York Attorney General’s office and inform users of all fees. The restitution paid to investors and proposed regulations are a step towards better regulation in the cryptocurrency industry.