Bitcoin ATMs have become a preferred tool for scammers looking to defraud unsuspecting victims—especially seniors. These transactions are not like traditional financial transactions. The money sent through Bitcoin ATMs is nearly impossible to recover. This fact makes them an attractive option for criminals engaged in fraud and money laundering.
How Bitcoin ATM Scams Work
Scammers prey on the public’s lack of familiarity with cryptocurrency. They exploit individual fears through sophisticated fraud schemes. A common scam targeting older adults involves a fraudulent message or phone call. The call might be from someone claiming to be with Apple, Google, or another well-known company, or even law enforcement. The scammer tells the victim that their financial accounts have been compromised. The call recipient is told they need to take immediate action to prevent unauthorized transactions on their account. If the scammer is pretending to be from a law enforcement agency, they may even threaten the victim with criminal prosecution or jail time if the victim doesn’t pay a fine right away.
Victims are then instructed to withdraw large amounts of cash from their bank accounts. They are told to deposit the funds into a Bitcoin ATM. The cash is inserted and converted into Bitcoin. The victim is directed to scan and send a receipt or QR code to the scammer. The moment that transaction is completed, the money is gone —permanently. Traditional bank transfers, wire transfers, or credit card transactions have fraud prevention measures. These measures provide customer protection or financial institution safeguards to stop or reverse the transfer. That is not the case with Bitcoin ATM transactions.
Types of Bitcoin ATM Scams and Fraud
Bitcoin ATM scams and fraud come in different forms. Some of the most common types include:
- Romance Scams - A person pretends to be romantically interested in you, only to ask for money via Bitcoin.
- Pay your bills via Bitcoin - A scammer poses as a representative of a company and asks you to pay your bills via Bitcoin.
- Impersonators - Scammers pretend to be Bitcoin Depot employees or representatives and ask you for your personal information or Bitcoin wallet address.
- Rush Payments - Do not send payments related to any utility or government agencies such as the IRS. Scammers may pose as a government representative and claim you are being investigated and pressure you to make a payment.
- Investment / Employment Opportunities - Be cautious of offers that are too good to be true. Scammers may offer you enticing deals or investment opportunities that offer unrealistic returns/payouts which require payment using a Bitcoin ATM.
- Donations - Scammers may also appeal to your good will to make a donation to someone in need such as military personnel. Do not send payments to someone you have not met in person.
- Payments to Friends or Relatives - Scammers may impersonate friends or relatives. Be sure to receive verbal confirmation prior to sending money to any friend or family member.
- Store Employee Machine Test - Scammers pose as store managers, and mislead employees into loading cash into the machine to "test" functionality.
Why Bitcoin ATMs Are a Major Risk
Bitcoin ATMs lack oversight and regulation. For this reason, they are widely used for scamming and money laundering. Some consumers may attempt to use them for legitimate transactions. However, they often come with very high fees. The fees make them an inefficient and costly way to buy cryptocurrency. It’s safer and cheaper to convert cash to cryptocurrency through a licensed and regulated online exchange.
Without regulation, victims of Bitcoin ATM scams have no meaningful consumer protections. They also have little or no recourse for recovering their stolen funds. Financial institutions have fraud prevention departments that monitor transactions. Banks can file suspicious activity reports (SARs) to investigate potential fraud. Unfortunately, Bitcoin ATMs operate outside these safeguards. They allow scammers to steal money quickly and anonymously.
Real-Life Scams Cost Victims Thousands
Fraudsters employ Bitcoin ATMs for a well-known fraud scheme. They convince the victims that their Apple Pay or another account has been hacked. They urge the victim to withdraw their money and deposit it into a Bitcoin ATM. The scammers promise the money will be safe from hackers there in the ATM. The victim completes the transaction and sends a copy of the Bitcoin receipt to the scammers. The scammers then disappear with the money.
In another twist, the scammers may convince victims to download software onto their phones. This gives the criminals access to the victim's SIM card and phone data. The victims incur additional expenses when they discover they can only block the criminals’ access to their information by purchasing another cell phone.
A Call for Stronger Consumer Protections
Bitcoin ATMs are an unchecked risk for consumers. Michigan is not alone in facing this growing problem. Some states have taken action by limiting Bitcoin ATM transactions to $1,000 per day. The amount scammers can steal from victims in a single transaction is significantly reduced in this way. A similar limit in Michigan could have prevented an elderly couple from losing their entire life savings.
How to Protect Yourself from Bitcoin ATM Scams
To avoid becoming a victim of a Bitcoin ATM scam, remember these key points:
- No legitimate company or government agency will ever ask you to deposit money into a Bitcoin ATM. If someone makes such a request, it’s a scam
- Beware of urgent requests. Scammers create a sense of urgency to prevent victims from thinking critically about the request.
- Do not trust caller ID. Fraudsters can spoof phone numbers to make it appear as though they are calling from a trusted source
- Never download unknown software or grant remote access to your devices. This can allow scammers to take control of your personal information.
- Talk to your bank before making large withdrawals. If you’re instructed to move money in an unusual way, seek advice first.
- If you believe you have been targeted by a scam, report it immediately. Scams can be reported to the Michigan Attorney General’s Consumer Protection Team and local law enforcement.