Attorney General James Secures $4.3 Million from Cryptocurrency Company for Defrauding Investors

 

Under Agreement with AG James, Coin Cafe will Pay Full Restitution to New Yorkers and All U.S. Investors Who Were Deceived by Misleading Fees

Agreement Continues AG James’ Efforts to Bolster Oversight and Regulations of Cryptocurrency Industry

New York Attorney General Letitia James today secured $4.3 million from a Brooklyn-based cryptocurrency company, Coin Cafe, for defrauding investors. Coin Cafe is a cryptocurrency trading platform that allowed investors to store their Bitcoin in a Coin Cafe account, known as wallet storage. An investigation by the Office of the Attorney General (OAG) found that the company was charging investors exorbitant and undisclosed fees to use its wallet storage, despite marketing its wallet storage as “free” on its website. These fees to store Bitcoin were so high that they wiped out investors’ accounts entirely. Coin Cafe charged one New Yorker over $10,000 in one month and another investor more than $51,000 in fees over the course of 13 months. Coin Cafe has agreed to OAG’s findings that it routinely charged and increased fees without properly informing investors. As a result of today’s settlement, Coin Cafe will pay restitution to all investors who were misled, including more than $508,000 to more than 340 New York investors who were charged fees without their knowledge.

“When there are inadequate safeguards to protect consumers and investors, companies are able to take advantage of New Yorkers,” said Attorney General James. “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. Every New Yorker deserves to be confident that their investments are protected with commonsense regulations and real oversight.” 

Coin Cafe is a Brooklyn-based cryptocurrency trading platform that failed to register with OAG as a commodity broker-dealer as required by law. In July 2015, Coin Cafe filed an application with the New York State Department of Financial Services (DFS) for a virtual currency license, known as a BitLicense. Coin Cafe was allowed to continue its virtual currency business for seven and half years while DFS reviewed and considered its BitLicense application. The BitLicense for Coin Cafe was approved by DFS in January 2023. However, under New York law, broker-dealers with a valid BitLicense or a pending BitLicense application are still obligated to register with OAG. Failing to register with OAG violates the Martin Act and puts investors at risk.

The OAG’s investigation revealed that Coin Cafe claimed to provide its investors with a free account and free wallet storage but, in reality, Coin Cafe started charging storage fees for its wallet service beginning in September 2020 without informing investors. Coin Cafe changed the fee structure four times, each time increasing the amount it charged its customers, and each time without clearly telling investors of the increase. Coin Cafe implemented the most drastic fee structure change in October 2022. It charged investors the greater of 7.99 percent of the account or $99 worth of Bitcoin per month if an investor did not buy, sell, or transfer Bitcoin on the Coin Cafe site within 30 days. This amounted to investors being charged fees equal to 96 percent of the value of their account holdings. The fees were not disclosed on the website, and the notifications to investors did not make clear that investors would be charged increased fees. 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.

In October 2022, an OAG investigator opened an account with Coin Cafe and made two Bitcoin purchases. In December 2022, Coin Cafe sold the investigator $108 worth of Bitcoin in one transaction, and then sold the investigator $100 in another transaction. In total, the investigator had $208 worth of Bitcoin. However, in March 2023, even after receiving a BitLicense from DFS, Coin Cafe charged the investigator $99 in fees without proper notice, leaving the investigator with $109 in their account.

Today’s agreement requires Coin Cafe to refund all fees to U.S.-based investors who request a refund for the next year. Within five days of the effective date of the agreement May 18, Coin Cafe will contact U.S.-based customers via email to let them know they are entitled to a refund. Customers will be able to request a refund in writing through email, postal mail, or through Coin Cafe’s website. Coin Cafe will give OAG monthly updates regarding the status of those refunds. The agreement also requires Coin Cafe to limit the amount of fees charged for its wallet service to 0.002 percent per Bitcoin per month and ensure that all fees are adequately disclosed to investors.

Today’s settlement continues Attorney General James’ efforts to enforce New York laws in the cryptocurrency industry and protect New York investors. Earlier this month, Attorney General James announced sweeping cryptocurrency legislation that will increase regulations of the cryptocurrency industry to protect New York investors. If enacted, Attorney General James’ nation-leading crypto legislation would combat the fraud and deceit committed by Coin Cafe to protect investors by increasing transparency, boosting consumer protections, and stiffening penalties for violations.

In February and March of this year, Attorney General James brought lawsuits against CoinEx and KuCoin for failing to register as commodity broker-dealers. In January, Attorney General James and a multistate coalition recovered $24 million from the cryptocurrency platform Nexo for operating illegally and sued the former CEO of Celsius for defrauding investors and concealing the company’s dire financial condition. In June 2022, Attorney General James warned New Yorkers of the dangerous risks of investing in cryptocurrencies after the market reached then-record lows. Also in June, Attorney General James reached a nearly $1 million settlement with cryptocurrency platform Block Fi Lending LLC for offering unregistered securities. In March 2022, Attorney General James issued a taxpayer notice to virtual currency investors and their tax advisors to accurately declare and pay taxes on their virtual investments. In October 2021, Attorney General James directed unregistered crypto lending platforms to cease operations for not registering with the state.

Attorney General James once again urges New Yorkers who have been affected by deceptive conduct in the virtual assets markets to report these issues to OAG. Attorney General James also encourages workers in the cryptocurrency industry who may have witnessed misconduct or fraud to file a whistleblower complaint with her office, which can be done anonymously.

NYS Unemployment Rate Down 0.1 Percentage Point in April 2023

 

State Economy Lost 25,700 Private Sector Jobs in April

 According to preliminary seasonally adjusted figures released today by the New York State Department of Labor, the number of private sector jobs in New York State decreased over the month by 25,700, or 0.3%, to 8,225,700 in April 2023. The number of private sector jobs in the U.S. increased by 0.2% in April 2023.

New York State's private sector jobs (not seasonally adjusted) increased by 190,000, or 2.4%, over the year in April 2023, which was lower than the 2.6% increase in the number of private sector jobs in the U.S.

New York State's seasonally adjusted unemployment rate decreased from 4.1% in March to 4.0% in April 2023. At the same time, New York State's labor force (seasonally adjusted) increased by 16,700. As a result, the labor force participation rate increased from 60.7% to 60.8% in April 2023.

The number of private sector jobs in New York State is based on a payroll survey of New York businesses conducted by the U.S. Department of Labor’s Bureau of Labor Statistics (BLS). Monthly payroll employment estimates are preliminary and subject to revision as more complete data become available the following month. The BLS calculates New York State’s unemployment rate based partly upon the results of the monthly Current Population Survey (CPS) of approximately 3,100 households in the State.

Note: Seasonally adjusted data provide the most valid month-to-month comparison. Non-seasonally adjusted data are valuable in year-to-year comparisons of the same month – for example, April 2022 versus April 2023.

Statewide Industry Employment

April 2023 – Seasonally Adjusted

• On a net basis, the total number of nonfarm jobs in the state fell by 25,000 over the month, while private sector jobs fell by 25,700 in April 2023.

• At the same time, the total number of nonfarm jobs in the nation increased by 253,000, while private sector jobs increased by 230,000.

U.S. Job Growth Outpaces That of NYS

Over-the-Month % Change in Total Nonfarm & Private Sector Jobs, March – April 2023

Total Nonfarm and Private Sector Jobs Decreased in April 2023 Total Nonfarm and Private Sector Jobs (in 1000s), January 1990 – April 2023 Statewide Unemployment April 2023 – Seasonally Adjusted In April 2023, the statewide unemployment decreased from 4.1% to 4.0%. New York City’s unemployment rate increased from 5.3% to 5.4%. Outside of New York City, the unemployment rate decreased from 3.1% to 2.9%, its lowest rate on records dating back to 1976. The number of unemployed New Yorkers decreased over the month by 6,600, from 391,600 in March to 385,000 in April 2023. NYS Unemployment Rate Decreased Over the Month Labor Force Statistics, April 2022, March– April 2023 The Labor Force Increased and Number of Unemployed Fell in April Total Labor Force & Number of Unemployed, January 2009 – April 2023 Unemployment Rate Decreased in NYS and US Unemployment Rate, NYS & US, January 2009 – April 2023 Unemployment Rate Increased in NYC and Decreased in Balance of State Unemployment Rate, NYC & BOS, January 2009 – April 2023 Substate and Industry Employment  April 2023 – Not Seasonally Adjusted New York State Gains Private Sector Jobs Over the Year Over-the-Year Change in Total Nonfarm & Private Sector Jobs, April 2022 – April 2023 Note: The sum of sub-state area job estimates will usually differ from the New York State total. This is because the State total is calculated separately from the sub-state areas and is estimated based on an independent sample. The Number of Leisure & Hospitality Jobs Increased by 7.5% Over the Year Over-the-Year Change in Jobs by Major Industry Sector, April 2022 – April 2023 *Government includes public education and public health services. Note: The responsibility for the production of monthly estimates of state and metro area nonfarm employment by industry moved from the NYS Department of Labor’s Division of Research and Statistics to the U.S. Bureau of Labor Statistics (BLS), starting with the March 2011 estimates. More detailed information on the change is available on the BLS web site. Many economic data series have a seasonal pattern, which means they tend to occur at the same time each year (e.g., retail jobs usually increase in December). Seasonal adjustment is the process of removing seasonal effects from a data series. This is done to simplify the data so that they may be more easily interpreted and help to reveal true underlying trends. Seasonal adjustment permits comparisons of data from one month to data from any other month. In New York State, payroll jobs data by industry come from a monthly survey of business establishments conducted by the U.S. Bureau of Labor Statistics. Data are preliminary and subject to revision. Jobs data by industry do not include agricultural workers, the self-employed, unpaid family workers, or domestic workers in private households. Labor force statistics, including the unemployment rate, for New York and every other state are based on statistical regression models specified by the U. S. Bureau of Labor Statistics. The state’s unemployment rate is based partly upon the results of the Current Population Survey, which contacts approximately 3,100 households in New York each month.  Jobs and Unemployment Fact Sheet This fact sheet conveys important technical information that will contribute to a better understanding of labor force data (“household survey”), including resident employment/unemployment rates, and jobs by industry data (“business survey”), which are presented in the New York State Department of Labor’s monthly press release. State Unemployment Rates Based on Regression Model Beginning with data for January 1996, unemployment rates for New York State and all other states (as well as New York City and the City of Los Angeles) have been estimated using time-series regression statistical models developed by the U.S. Bureau of Labor Statistics (BLS). Advantage of Regression Model Use of a time-series regression model reduces the month-to-month variation in unemployment rates and resident employment by reducing variation caused by sampling errors and other components of statistical noise (irregularities). Benchmarking of Estimates Once each year, labor force estimates, such as civilian labor force and the unemployment rate, are revised to reflect updated input data including new Census Bureau populations controls, newly revised establishment jobs data and new state-level annual average data from the Current Population Survey (CPS). As part of this procedure, all state figures are reviewed, revised as necessary and then re-estimated. This process is commonly referred to as “benchmarking.” Changes in Methodology Labor force estimates are now produced with an improved time-series regression model, which utilizes “real-time” benchmarking. “Real-time” benchmarking reduces end-of-year revisions, which also means that major economic events will be reflected in a more timely manner in state labor force estimates. In addition, the new methodology includes an updated way of estimating for sub-state areas (e.g. counties, metro areas) the number of unemployed who are new entrants or re-entrants into the labor force. This change in methodology will result in lower unemployment rates in some areas and increased rates in others. Unemployed and UI Beneficiaries The estimate of the number of unemployed includes all persons who had no employment during the reference week (the week including the 12th of the month), were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Unemployment insurance (UI) beneficiaries include those who apply for and qualify for UI benefits. Consequently, the estimate of the number of unemployed and the number of UI beneficiaries do not necessarily move in tandem. Jobs Data Jobs data are obtained from a separate joint federal-state survey of business establishments. The survey, called the Current Employment Statistics of Establishments, has a sample size of 18,000 establishments in New York State. It excludes self-employed workers, agricultural workers, unpaid family workers and domestic workers employed by private households. This data represents a count of jobs by place of work. Data for each month is revised the following month as more complete information becomes available. The New York State Department of Labor is an Equal Opportunity Employer/Program.

Half Million NYCers Could Gain $2.4B in Annual Wages by Sealing Past Convictions, NYC Comptroller Lander Finds

 

In a new report, New York City Comptroller Brad Lander calculated that over half a million New York City residents, who are eligible to have their criminal history automatically sealed, stand to gain a collective $2.4 billion in annual wages under the Clean Slate Act.

The Clean Slate NY Act (S.211/A.1029) would seal criminal conviction records for justice-involved people after completing probation or parole and significant time (3 years for misdemeanors and 7 years for felonies) lapsed since their last offense. Sealing prior convictions would allow formerly convicted people, who previously had to disclose their history on applications or submit to a background check, to gain employment, education, and housing opportunities.

“If you committed a crime and served your time, your past history should not become a barrier towards a job, a degree, or a home,” said New York City Comptroller Brad Lander. “Passing the Clean Slate Act would close the employment gap for New York City’s communities of color and half a million New Yorkers would in turn contribute to the economic landscape of our city. Gaining employment is a proven way to stop the revolving door of our carceral system and move toward a system of true justice and economic freedom.”

Data Collaborative for Justice at John Jay College estimated just under 745,000 individuals have a criminal conviction between 1980 and 2019 in the city and 44% have only a misdemeanor conviction. Under the proposed Clean Slate Act, taking time since last conviction into account, the Comptroller’s Office estimates that about 318,000 people with a misdemeanor and 224,000 individuals with a felony (and possibly a misdemeanor) record would be automatically eligible for full record expungement. Of those possibly eligible people, 417,000 are estimated to be of working age.

University of Santa Clara researchers found that national earnings losses associated with a felony conviction is $6,400 and $5,100 from a misdemeanor. With automatic sealing of old criminal convictions, the Comptroller’s Office estimates that these New Yorkers could see an increase of an estimated $2.4 billion in annual wages.

In New York, only 0.2% of eligible people have successfully sealed their criminal records. According to the University of Michigan Law School, once a criminal record is sealed, a person sees on average a 22% wage increase within one year and is less likely to recommit a crime.

New York City’s 2023 Q1 unemployment rate for Black New Yorkers is at 12.5%, and 6.1% for Latino New Yorkers, both well above the overall 5.4% unemployment rate. While data on race and ethnicity of people with past convictions are only available from 1990 – onward, from that data, 42.4% are Black, and 36.9% are Latinx and over half have only one or two convictions on their record.

Former NYPD Police Officer Sentenced to 33 Months Imprisonment for Engaging in Bribery Scheme

 

Earlier today, at the federal courthouse in Brooklyn, Michael Perri, a former New York City Police Department (NYPD) police officer, was sentenced by United States District Judge Rachel P. Kovner to 33 months of imprisonment and a $25,000 fine for conspiring to use interstate facilities to commit bribery.  Perri has already paid the government over $158,000 in forfeiture.  During the relevant period, Perri was a recently retired NYPD police officer formerly assigned to the 107th Precinct in Queens.  Perri pleaded guilty to the charge in November 2022.  Perri’s co-defendant, James Davneiro, a NYPD police officer in the 107th Precinct during the relevant period, was sentenced in March 2023 to one year of imprisonment after pleading guilty to the same offense.  Another of Perri’s co-defendants, Giancarlo Osma, also a NYPD police officer with the 107th Precinct during the relevant period, was sentenced in April 2023 to 14 months’ imprisonment, after pleading guilty to the same offense.

Breon Peace, United States Attorney for the Eastern District of New York, Michael J. Driscoll, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Keechant L. Sewell, Commissioner, New York City Police Department (NYPD), announced the sentence.

“Michael Perri, after retiring from the NYPD, conspired with two police officers to betray their oaths and the public with promises of easy money, and as a result, they have all been sentenced to prison for their corruption,” stated United States Attorney Peace.  “This Office will vigorously investigate and prosecute public servants and their associates who exploit their positions of power for private gain.”

“Dedicated to uncovering and eradicating corruption in all its forms, investigators with our Internal Affairs Bureau worked tirelessly since the outset of this case,” stated NYPD Commissioner Sewell.  “There must always be zero tolerance for such betrayals of public trust. I thank our partners with the FBI’s Public Corruption Unit and everyone from the U.S. Attorney’s Office for the Eastern District who helped to guide this case through to its conclusion.”

According to court filings, Perri orchestrated a scheme to pay thousands of dollars in bribes to co-defendants Davneiro and Osma for their corrupt agreement to assist an automobile repair and tow trucking business that Perri had begun operating upon his retirement from the NYPD (the “Business”).  Beginning in May 2020, Davneiro and Osma responded to automobile accidents and directed the damaged vehicles to the Business operated by Perri, instead of using the NYPD’s Directed Accident Response Program (DARP), which requires NYPD officers to identify an appropriate licensed tow trucking business to respond to the scene of the automobile accident and remove the damaged vehicles from the scene.  To ensure that no particular business receives favored treatment, NYPD officers are required to use a computer system that randomly selects a licensed tow trucking business.  Davneiro and Osma bypassed DARP and directed damaged vehicles directly to the Business in exchange for thousands of dollars in bribe payments paid by Perri.  Perri, Davneiro, and Osma continued to participate in the scheme until May 2021, when they were arrested.  In total, Davneiro and Osma steered at least 73 vehicles damaged in automobile accidents to Perri, resulting in total profits to the Business of more than $150,000.  In exchange, Perri paid Davneiro and Osma more than $50,000 in bribes in total.

NYS Office of the Comptroller DiNapoli: Local Sales Tax Collections Grow by 1.5% in April Compared to Last Year

 

Local sales tax collections in New York state increased by 1.5% in April compared to the same month in 2022, according to an analysis released today by State Comptroller Thomas P. DiNapoli. Overall, local collections totaled $1.74 billion, up $25.8 million compared to the same time last year.

“Year-over-year sales tax growth has slowed from its recent inflation-fueled rise, and from the spikes seen during the pandemic recovery,” DiNapoli said. “April collections were likely affected by a number of factors, including lower gas prices and moderating inflation. Sales tax collections typically fluctuate month to month, and slower overall growth will mean more local governments may see declines. Good cash management practices will help them weather unexpected shortfalls in collections.”

For April 2023 compared with April 2022:

• New York City’s collections totaled $756 million, an increase of 4.1%, or $30 million.
• Most (49 out of 57) counties experienced some year-over-year decline.
• Livingston County had the largest decline at 20.6%.
• Rockland County experienced the strongest growth at 7.9%.

These monthly sales tax collections are from the cash distributions made to counties and tax-imposing cities by the state Department of Taxation and Finance, and the amounts are based on estimates of what each municipality is due. In the third month of each calendar year quarter, these distributions are adjusted upward or downward, so that the quarter as a whole reflects reported sales by vendors. The next quarterly numbers (for April to June) will be available in July.

Table

Monthly Local Sales Tax Collections by County and Region

Attorney General James Co-Leads Bipartisan Coalition of 39 AGs to Protect Communities from the Dangers of Illicit Xylazine

 

New York Attorney General Letitia James today co-led a bipartisan coalition of 39 attorneys general in urging Congressional leadership to pass the Combating Illicit Xylazine Act (H.R.1839/S.993), which would provide critical measures to combat the widespread illicit use and trafficking of xylazine and help prevent xylazine-related deaths. Today’s letter comes following a surge in overdose deaths nationwide related to xylazine, a potent veterinary medication that has been widely mixed with opioids like fentanyl and is easily obtainable online. Over the past few months, multiple federal agencies, including the U.S. Drug Enforcement Administration (DEA), have issued public alerts about the dangers of xylazine. Most recently, the White House declared fentanyl-adulterated or -associated xylazine (FAAX) an “emerging threat” to the nation. 

“New Yorkers, and all Americans, are under threat from yet another dangerous drug that is claiming lives at an alarming rate,” said Attorney General James. “When used correctly, xylazine is an important veterinary medication, but it was never meant to be used by humans, especially as an additive to fentanyl. The emergence of xylazine is the latest iteration of the opioid crisis that has claimed thousands of lives throughout the country. We know the grave dangers of these drugs and we must pass the federal Combating Illicit Xylazine Act to provide New York, and all states, with the tools we need to combat this emerging threat before it’s too late.”   

Xylazine is only approved by the U.S. Food and Drug Administration (FDA) as a veterinary medicine used to sedate and relieve pain in large animals. In humans, xylazine is known to depress breathing and heart rate, lower blood pressure, and cause unconsciousness, necrosis, and even death. Xylazine is not an opioid, thus existing medications like naloxone are not effective in reversing the drug’s effects even if used with opioids.

According to the DEA, there was a dramatic increase in xylazine-related overdose deaths across the United States between 2020 and 2021, with an increase of 1,127 percent in the Southern region, 750 percent in the Western region, 516 percent in the Mideast region, and 103 percent in the Northeast region. Xylazine has also been linked to hundreds of deaths throughout New York state, with more than 180 fatal overdoses in Monroe County alone since 2019. According to the Office of the New York City Special Narcotics Prosecutor, New York City has also experienced an increase in xylazine-involved deaths with a jump of 36 percent between January and October of last year compared to the same time period in 2021. Additionally, in 2022, approximately 23 percent of fentanyl powder and seven percent of fentanyl pills seized by the DEA contained xylazine. To prevent the proliferation of FAAX in communities and keep people safe, Attorney General James and the coalition emphasized the importance of the measures outlined in the Combating Illicit Xylazine Act, which includes:   

• Classifying the illicit use of xylazine as a Schedule III drug under the federal Controlled Substances Act;  
• Allowing the DEA to track the manufacturing and sales of xylazine to ensure that it is not diverted; 
• Requiring the U.S. Attorney General, acting through the DEA and in coordination with the FDA Commissioner, to submit a report to Congress detailing the prevalence, risks, and recommendations on how to regulate the illicit use of xylazine; and  
• Ensuring all salts, isomers, and other forms of xylazine are also covered when restricting the drug’s illicit use.

Joining Attorney General James in co-leading today’s letter are Connecticut Attorney General William Tong, Florida Attorney General Ashley Moody, and Tennessee Attorney General Jonathan Skrmetti. They are joined by the attorneys general of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, the District of Columbia, Georgia, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin.

Today’s action is the latest in Attorney General James’ efforts to combat the opioid epidemic and keep New Yorkers safe. In March 2019, Attorney General James filed a historic lawsuit to hold various opioid manufacturers and distributors responsible for their roles in the crisis. Attorney General James has recovered more than $2.6 billion to support New York opioid abatement, treatment, and prevention efforts from companies including Teva Pharmaceuticals, Mallinckrodt, Allergan, Endo, McKesson, Cardinal Health, and Amerisource Bergen. Attorney General James has also led multistate coalitions in reaching settlements for billions of dollars with CVS, Walgreens, and Walmart for their role in failing to properly regulate opioid prescriptions. Additionally, Attorney General James has also cracked down on dozens of drug trafficking rings, taken action against drug peddlers, and removed dangerous drugs out of New York communities.