Iowa Attorney General to sue crypto ATM companies

Iowa Attorney General Brenna Bird announced Wednesday at a news conference that she’ll file lawsuits under the Iowa Consumer Fraud Act against Bitcoin Depot and CoinFlip, the two most popular cryptocurrency ATM companies in the state, for their alleged role in helping scammers steal more than $20 million from Iowans.

“As attorney general and as a prosecutor, nothing makes me more mad than seeing an Iowan get ripped off by a con artist,” Bird said in a new conference. “These companies have not done nearly enough to prevent scams at their machines. … These companies profit off of scam victims.”

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While Bird’s office provided copies of the lawsuits to reporters, online court records did not show Wednesday evening they had been filed yet.

Both companies released statements Wednesday evening in response to Bird’s announcement. Both emphasized the safety procedures they have in place and disagreed with Bird’s claim that they are assisting fraudsters.

Law enforcement, citizen complaints

Bird said her office started investigating crypto ATMs in October 2023 after hearing reports from law enforcement agencies and citizens about online and phone scammers relying on crypto ATMs to complete their frauds.

Crypto ATMs usually are not found in banks and aren’t used to connect to regular bank accounts — but rather are used to exchange cash for cryptocurrency. Money can be inserted into the machine and transferred into a crypto wallet anywhere in the world. Once it has been transferred, it is almost impossible to get back, according to Bird.

This makes the ATMs a popular tool for scammers, who connect with Iowans over the internet or the phone and trick them into sending money through the ATMs, often by lying about emergencies involving a family member or an arrest warrant for missing jury duty, among other falsehoods.

“Crypto ATM companies should know this, and in fact, their entire business model depends on it. Some of these companies take more than a 20 percent cut of the money sent through these machines to the con artists,” Bird said. “They profit off the scams and they act, these crypto ATM agencies, they act as the getaway driver for scammers. Picture a taxi driver who only shows up at bank robberies. That’s the reality of what we’re dealing with here.”

As part of its investigation, Bird’s office subpoenaed 14 crypto ATM companies for lists of Iowans who have sent money through their kiosks. From those lists, the office reached out to Iowans who had used the ATMs. The office also investigated claims made to local law enforcement agencies about scams that involved crypto ATMs.

According to data that Bird’s office has tracked so far, Iowans have lost $7.2 million in the last three years through Bitcoin Depot ATMs and $11.2 million through CoinFlip ATMs. Bird said the companies also hide how much they charge in fees, and Bitcoin Depot misleads users about its refund policy.

“To be clear, the problem here has nothing to do with cryptocurrency itself. Cryptocurrency is an exciting development, a new technology. This, though, has everything to do with cracking down on crypto ATMs,” Bird said. “If we asked a simple question, ‘can these companies survive without these scammers?’ what would the answer be? From our data, the answer is no.”

Ways to keep from being scammed

The news conference Wednesday also included comments from Adam Gregg, the former Iowa lieutenant governor who now is president and chief executive officer of the Iowa Bankers Association. He spoke about how Iowans could protect themselves from crypto scams and other frauds.

Bankers are trained to spot the signs of a scam, he said, so if a banker is asking questions about your transaction or warning you it looks suspicious, it is worth listening. He also advised to slow down when confronted with an emergency situation over the phone or internet, as scammers often strive to make victims feel they need to act urgently without taking the time to think through what their being told.

“Do not withdraw cash in response to an unexpected call or message. That is a huge red flag, and basically only scammers do that. And similarly, don’t believe anyone who tries to tell you to use a crypto ATM to solve a problem. Real businesses don’t do that. The government doesn’t do that,” Gregg said.

Bird also asked a victim of fraud, a woman identified in the news conference only as Laurie, to speak. “Laurie” said she lost $25,000 to a crypto ATM scam after someone impersonating a federal officer called her and told her there was a warrant out for her arrest in Texas for money laundering, and that someone had likely stolen her identity.

She was told not to talk to anyone else about the situation and instructed to put money into what she was told was a federal account through a crypto ATM, with the assurance that she would get the money back after the case was resolved.

Companies respond

Both ATM companies refuted Bird’s claims.

“We don’t believe these allegations reflect or align with CoinFlip’s strong compliance and consumer protection practices, which we look forward to defending. We never want to see anyone get scammed, so we work to protect customers with blockchain analytics to stop fraud, visible consumer warnings, and education campaigns,” CoinFlip’s statement reads.

“Thousands of Americans count on the freedom to use crypto kiosks every day for legitimate transactions, and protecting these consumers as they use kiosks to access digital currency is an important way to support our country’s national crypto innovation goals.”

Bitcoin Depot agreed, stating that the company is “committed to being an industry leader and mainlining the highest compliance standards in the Bitcoin ATM industry.”

“Our industry leading compliance program includes robust Know-Your-Customer, Anti-Money Laundering programs designed to detect and prevent fraud, which include sanction screening, transaction monitoring and the use of blockchain monitoring. Bitcoin Depot actively collaborates with state regulators, federal and local law enforcement, and consumer advocacy groups to promote responsible legislation for the Bitcoin ATM industry that is focused on compliance, anti-fraud measures, and consumer privacy. Bitcoin Depot remains dedicated to raising the industry standard and ensuring a secure and transparent experience for all users.”

Comments: (319) 398-8328; emily.andersen@thegazette.com