Coinflip must pay more than $4.8 million to scam victims under an order targeting bitcoin ATM fraud in California, the state’s Department of Financial Protection and Innovation said on November 4. The operator also owes the regulator more than $350,000 in fees that the agency said it charged illegally.
Summary
Key takeaways
- California’s order requires Coinflip to make payments exceeding $5 million.
- Investigators identified customer-verification and suspicious-activity failures dating to 2021.
- In the first half of 2024, roughly 71% of reported kiosk fraud losses were attributed to individuals aged 60 and older.
California orders Coinflip to compensate scam victims
The DFPI’s order requires compensation for victims and a separate payment to the regulator for illegally charged fees. Coinflip operates about 500 bitcoin ATM kiosks across California, usually inside grocery stores, gas stations and convenience stores.
The agency said the operator’s compliance failures allowed scammers to exploit customers and drain their assets. Beyond the financial requirements, the order directs Coinflip to stop unlawful, unfair, deceptive or abusive practices.
“Robust anti-fraud and consumer-protection practices are a requirement of doing business in California, not a suggestion,” DFPI Commissioner KC Mohseni said.
Investigators cite identification, transaction and disclosure failures
Coinflip failed to properly identify customers and to detect, prevent, report and reduce suspicious activity beginning in 2021, DFPI investigators found. The agency also identified transactions that exceeded California’s $1,000 daily limit per customer.
Consumer disclosures were another part of the findings: Coinflip did not provide written disclosures before purchases, and some transaction receipts lacked required information.
The enforcement order cites the Digital Financial Assets Law, which regulates crypto businesses and establishes kiosk rules, alongside federal anti-money laundering requirements and the California Consumer Financial Protection Law.
How bitcoin ATM fraud in California reaches victims
Impersonation scams accounted for about 86% of kiosk fraud loss reports in the first half of 2024. People aged 60 and older represented about 71% of reported losses involving the machines during that period.
The Federal Trade Commission describes schemes in which scammers pretend to represent government agencies, businesses or technical support services. Fake alerts about suspicious activity or computer security problems lead to instructions to withdraw cash and deposit it into a nearby kiosk.
A scammer-provided QR code directs the purchased bitcoin into the fraudster’s wallet. The DFPI said kiosk transactions happen immediately, cannot be reversed and are difficult for consumers to trace.
Other states pursue refunds as California targets kiosk operators
Steps to recoup losses or set up refund programs for crypto ATM scam victims have also been taken by Arizona, Alabama and Ohio, with measures ranging from eligibility-based reimbursement policies to fund recovery via investigation.
On August 12, Arizona announced that 35 victims had been fully reimbursed, amounting to $171,332 in total, under rules applying to customers who used an operator for under 10 days and filed a fraud report with evidence within 30 days.
Starting October 1, Alabama’s refund policy allows eligible new customers to reclaim the entire transaction sum along with fees, while existing customers are entitled to half the transaction value plus the full fees, provided the fraud is reported by both groups within 60 days.
In Ohio, $15,300 taken via a crypto ATM in a fraudulent Microsoft support scam was tracked down and frozen by investigators, allowing the 63-year-old victim to get her money back on October 8 following collaboration between agents and the Allen County Prosecutor’s Office that led to a search warrant.
This action against Coinflip joins a broader pattern of enforcement targeting bitcoin ATM fraud in California, where Hermes Bitcoin has been shut down and fines have been levied against RockItCoin, Coinme and Coinhub, while the DFPI maintains a Crypto Scam Tracker for consumers to file fraud complaints.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
