Ruling: Iowa victims who say they were scammed can’t get back $28K

The Iowa Supreme Court granted two appeals Friday by a bitcoin company, claiming it was the rightful owner of over $28,000 in cash deposited into bitcoin machines by two Linn County residents who say they were scammed.

Both Carrie Carlson and Shelby Cason separately reported to the Linn County Sheriff’s Office they had been the victims of fraud after being told they each must deposit over $14,000 into bitcoin ATMs in exchange for cryptocurrency.

Carlson told investigators she had been contacted Feb. 8, 2024, by a person claiming to be with the “Geek Squad” who said her accounts had been compromised and directed her to deposit $14,100 in cash into a bitcoin machine inside a gas station in Cedar Rapids. She was then told to place the bitcoins in a digital wallet to avoid her accounts being “impacted,” according to court documents.

Cason, 70, of Coggon, told investigators he was contacted by a person on July 28, 2023, and told he needed to deposit $14,800 in cash into a bitcoin machine at the Hawks Smoke Shop, 1396 Seventh Ave., in Marion. If Cason didn’t, the person would turn him into the FBI for supposedly having child porn on his computer.

During the two investigations, both deposits identified by the specified bills Cason and Carlson withdrew from their bank accounts were retrieved from the machines and seized by the sheriff’s office as evidence in the separate fraud cases.

Sheriff Brian Gardner said Friday both fraud cases were closed with “leads exhausted.”

“In one case the wallet address belonged to someone from out of the country,” Gardner said. “No charges were pursued as no suspect could be identified.”

Bitcoin Depot Operating LLC filed two separate applications for the return of the cash to it, claiming it was the rightful owner. Cason and Carlson each asked the court to return their money.

After hearings last year, 6th Judicial District Judge Ian Thornhill ruled the seized funds should be returned to Cason and Carlson, according to court documents.

Bitcoin Depot appealed those rulings and the Iowa Supreme Court in this ruling decided who should receive the seized cash.

Bitcoin argued when a customer deposits cash into a bitcoin ATM in exchange for cryptocurrency, the customer must answer a prompt, asking if the bitcoin is going into that customer’s own digital wallet or someone else’s wallet, according to the ruling. The prompt also states “all bitcoin transactions are final and irreversible,” and warns QR codes provided by government entities could be scams.

The bitcoin company also argued customers agree to their terms and conditions, which state all cash deposited into a machine owned by Bitcoin Depot becomes the property of the company.

Both Cason and Carlson separately argued their contracts with Bitcoin Depot should be void because of third-party duress — threats by the alleged scammers.

Carlson said the “warning prompt,” asking the customer if the bitcoin is going into the customer’s own wallet, demonstrates Bitcoin Depot had “reason to know” of Carlson’s duress. By providing that warning, the company acknowledges its customers are often being scammed, she argued.

The court ruled a generalized warning provided to all customers was insufficient to establish Bitcoin Depot had knowledge of threats being made to Carlson or Cason. The contracts between Bitcoin Depot and the two customers isn’t “voidable.”

Bitcoin Depot has the “greater right to possession” of the cash seized by the sheriff’s office, the ruling states.

The court ruled the district court orders in Cason and Carlson are overturned and both are sent back with instructions to return the cash to Bitcoin Depot.

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