State regulators have ordered a Seattle-based cryptocurrency exchange company that serves the Tri-Cities area to stop collecting any new funds and refund customers, alleging the firm wrongfully claimed millions of dollars of wired funds as its own income.
The state Department of Financial Institutions (DFI) issued the temporary restraining order and statement of charges against CoinMe on Dec. 1 following an investigation into the firm’s money transmission and virtual currency kiosk operations.
DFI says the investigation revealed CoinME allegedly committed multiple violations of consumer finance protections. State regulators also are pushing to revoke the company’s license to operate in the state.
“Washington’s money transmission laws exist to protect consumers that rely on licensed companies to safely transmit funds,” said DFI Director Charlie Clark in a statement. “When our investigations reveal serious violations, we will take appropriate action.”
CoinMe allows consumers to buy cryptocurrency such as Bitcoin at kiosks or ATMs. There are dozens of locations where the company offers its services, such as through CoinStar coin counting machines and its own kiosks at various retailers.
DFI claims CoinMe inappropriately claimed more than $8 million owed to consumers as its own income when consumers did not redeem purchased currency vouchers during a specific timeframe.
State regulators also allege CoinMe did not disclose material information to consumers about the time frame allowed to redeem vouchers and did not properly return unclaimed consumer property to the state as required by law.
Among the other allegations levied against the company:
- Listing an inactive consumer support phone number on the vouchers provided to consumers.
- Failed to maintain legally required tangible net worth.
- Did not maintain records substantiating that the required level of permissible investment requirements were met.
- Failed to timely report required information to DFI.
- Filed inaccurate reports with DFI.
