Summary

  • The California Department of Financial Protection and Innovation (DFPI) said it ordered crypto ATM operator CoinFlip to fully reimburse scam victims more than $4.8 million.
  • The DFPI said CoinFlip violated related laws by failing to adequately carry out anti-fraud duties including identity verification, suspicious transaction detection, compliance with the $1,000 daily transaction limit, and required customer disclosures.
  • As crypto ATM scams and losses among older victims spread across the US, states including Arizona and Alabama are strengthening consumer protection measures by introducing refund and compensation programs.

Forecast Trend Report by Period

California’s financial regulator has ordered cryptocurrency ATM operator CoinFlip to compensate victims of fraud.

Bitcoin.com reported on November 9 that the California Department of Financial Protection and Innovation ordered CoinFlip on November 4 to fully reimburse residents who lost money to scams, totaling more than $4.8 million. The agency also ordered the company to return more than $350,000 in improperly charged fees.

The regulator’s investigation found that CoinFlip failed from 2021 to adequately carry out anti-fraud obligations, including user identity verification and suspicious transaction detection. The agency said those compliance failures allowed criminals to use crypto ATMs to steal funds from victims.

Investigators also found that CoinFlip allowed transactions above its $1,000 daily limit per customer and failed to properly provide required disclosures before customers bought crypto. Some receipts also omitted required information. DFPI said the conduct violated California’s Digital Financial Assets Law, consumer financial protection law and federal anti-money laundering rules.

Crypto ATMs are typically installed in grocery stores, gas stations and convenience stores. Scammers have posed as government officials or customer support staff and falsely claimed there was a problem with victims’ accounts. They then persuaded victims to withdraw cash and send it through an ATM. Once a transaction is completed, the crypto is sent to wallets controlled by criminals, making the funds difficult to recover.

According to the US Federal Trade Commission, about 86% of reported losses tied to crypto ATM scams in the first half of 2024 involved impersonation schemes linked to government agencies, businesses or technical support staff. About 71% of losses during that period were suffered by people age 60 or older.

DFPI Commissioner KC Mohseni said anti-fraud and consumer protection measures are a basic requirement for doing business in California. The agency ordered CoinFlip to stop illegal or deceptive business practices and will continue oversight of crypto ATM operators.

Similar consumer protection measures are expanding in other US states. Arizona refunded a total of $171,332 to 35 victims of crypto ATM fraud in August, while Alabama began a program in October to return transaction amounts and fees to victims who meet certain conditions.

Suehyeon Lee