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There’s a remarkable new report from the CNN Investigates team about crypto ATMs, devices that can be found in your convenience store that allow people to exchange money for cryptocurrencies such as Bitcoin.
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I was struck by the fact that CNN documented at least a dozen potential fraud cases linked to a single ATM. This indicates not only that an ATM has a problem, but that these fraud cases are commonplace in the United States.
The shame of having been deceived can prevent many people from reporting that they have been defrauded, and when they do, authorities are often unable to help them. But now, using crypto ATMs (there’s probably one near you), scammers have changed the way things work. And the companies that operate these machines benefit.
The companies behind these crypto ATMs have hotly disputed allegations that they profit from scams and listed various efforts to protect consumers. There’s more to all this in the story.
I spoke to three of the CNN journalists who worked on the investigation, Yahya Abou-Ghazala, Curt Devine and Majlie de Puy Kamp. They answered my questions by email. Our conversation is below:
What made you realize these crypto ATMs were a story? Was it something specific?
We’ve previously written about state attorneys general taking lavish foreign trips paid for by the industries they oversee, including a luxury trip to Rome earlier this year. Our colleagues traveled to Italy to document the trip and noticed that someone stood out among the participants. This person appeared younger than the other participants and was not a recognizable government official or lobbyist. It turned out to be Ben Weiss, CEO of CoinFlip, a crypto ATM company that had been sued by the state of Iowa for allegedly profiting from scams (which the company disputes). We didn’t know much about crypto-ATM companies at the time, but we realized that it was an industry that was gaining influence with government officials and was facing increased scrutiny.
These scams appear to follow a scenario in which the victim is intimidated with a threatening phone call and an urgent demand for money. What have crypto ATMs changed?
Crypto ATMs have made it easier to quickly send large volumes of currency to locations beyond the reach of U.S. law enforcement. Rather than sending their victims to buy a bunch of gift cards for $500 each, for example, scammers can send them to a single machine to deposit thousands of dollars at once, then route the change overseas.
Fraudsters also take advantage of the average person’s lack of knowledge about the machines themselves. In our experience reporting this story, many people are unfamiliar with crypto ATMs and how they work. Scammers tend to exploit this, especially when posing as law enforcement or government officials. They often send elderly victims to these machines under the assumption that crypto ATM is a legitimate way to pay (invented!) fines, fees, or debts to businesses or the government. In one incident, a scammer referenced the strategic Bitcoin reserve that President Donald Trump created to make a victim feel more comfortable putting money into one of these machines.
Many people, including me, have received phishing calls from people with personal information about you. They’re scary. Many people probably realize it’s a scam before handing over any money. How often are calls successful?
This question is difficult to answer, but given the prevalence of these fraudulent texts, we have to assume that they are lucrative for criminals. The FBI told us that Americans lost approximately $240 million to crypto ATM scams in the first half of this year. What’s interesting is that we’ve seen people from all walks of life fall for these scams, including doctors and CEOs.
It’s easy to blame the scam victim for falling for it, but the fact is that if the scam is well-targeted, you will likely fall for it too. And these days, there’s so much information about people available online that it doesn’t take much for a scam to be targeted enough to be credible.
Is there any evidence of an organized effort behind this? What do we know about the people doing the targeting?
In most of the local cases we examined, the identity of the fraudster remains a mystery. But in some cases, specific people have been charged — such as an Indian citizen indicted last year who prosecutors called a “high-level member of a sophisticated and organized transnational fraud ring.” This case remains unresolved and much of it is sealed. Some Americans have also been charged. We also know that there are fraud networks in countries like Myanmar, where thousands of people are detained against their will and forced to work for low wages to commit financial scams targeting Americans. So it’s certainly possible that some of the scammers trying to trick people in the United States into transferring money to them via crypto ATMs are victims of crime themselves.
You’ve linked multiple scams to a single ATM. How long did this process take? Is there a way for people to know if nearby ATMs have been used in scams?
We requested records from police departments, the Federal Trade Commission and state offices across the country and reviewed each incident report to record the details in a spreadsheet. It took us about four months to receive the files and register more than 700 cases. It was during this process of manually reading each report that we began to notice recurring addresses for the same location or store. Once we put it all together, the spreadsheet became a wealth of information allowing us to see how much money people had lost, what type of scam had targeted them, and which ATMs they were using.
It would take a long time to replicate this process, and the question is not whether a particular crypto ATM has been used repeatedly by fraudsters. The fact is that these scams are now commonplace, so if someone tells you that you need to deposit money into one of these machines to pay a fine or avoid a penalty, it is almost certainly a scam.
Crypto ATM owners claim that most transactions are legitimate. Is there any data to support this claim?
This is an excellent question, with a somewhat convoluted answer. Some companies pointed to a report from analytics group TRM Labs, which found that 1.2% of cash-to-crypto transactions were illicit in 2023. That’s a relatively low number.
But some law enforcement investigations that obtained data from particular crypto ATM companies and interviewed customers found that suspected scams accounted for much higher percentages of those companies’ business. Washington’s attorney general has claimed that more than 90% of deposits made at one company’s ATMs came from fraud over several months, which the company disputes.
One thing that stands out is that it appears there is little law enforcement can do after a person uploads money to the crypto ATM. What are the obstacles to recovering the money?
Once you insert cash into a crypto ATM, that currency can be quickly transferred almost anywhere in the world. The problem with recovering the money later is that fraudsters often direct the funds to cryptocurrency exchanges outside of U.S. jurisdiction, which are less likely to cooperate with U.S. law enforcement.
Are lawmakers talking about some sort of regulation? What are the remedies envisaged?
More than a dozen states have passed laws aimed at mitigating crypto ATM scams. They impose requirements such as daily transaction limits on machines, which aim to reduce what scam victims might lose. As lawmakers sought to crack down, crypto-ATM companies hired lobbyists across the country and even pushed their own model legislation with fewer protections. In Missouri, for example, lawmakers this year passed regulations that match model legislation passed by CoinFlip in another state almost word for word, with no transaction limits. Some federal lawmakers have pushed for stricter rules, but remember that the Trump administration has relaxed oversight of the crypto industry. These regulatory debates could therefore continue for years.