WASHINGTON, DC  – The FBI just released a report which says people in Rhode Island have lost over $10.3 million to cryptocurrency scams in 2023, reporting over 150 complaints of fraud related to cryptocurrency.  One way scammers have targeted people is through the use of Bitcoin ATM (BTM) machines, also known as a crypto kiosk.

Thousands of unsuspecting seniors and others are getting ripped off by criminals who use all kinds of shady techniques to trick people into using the digital currency kiosks to deposit cash.  Over the summer, the Woonsocket Police Department warned residents about a rash of Bitcoin scammers targeting local residents and stealing about $100,000, mostly through Bitcoin ATMs.

According to the Federal Trade Commission (FTC) there has been a massive increase in the amount of money consumers report losing to scammers involving Bitcoin ATM machines. Since 2020, the amount consumers reported losing has increased nearly tenfold and the median amount of money lost by victims this year was $10,000 per person.

In 2023, the Federal Bureau of Investigation (FBI) received more than 5,500 complaints regarding crypto kiosks being used for fraudulent activity with losses over $189 million.  Americans over 60 years old filed the vast majority of complaints and suffered the vast majority of losses.  And this data from the FTC and FBI likely under-report the true extent of the scams and fraud associated with crypto kiosks.

The New York Times outlines egregious examples of criminals contacting elderly Americans and using threats and other forms of intimidation to coerce them into depositing large sums of money in the criminals’ crypto wallets via local BTMs, which look like a regular ATM, and allow users to insert cash to buy Bitcoin, a cryptocurrency.  The machines are increasing equipped with warning messages, but for many seniors who’ve lost their retirement savings at Bitcoin ATMs, those warnings are not enough.

Now, U.S. Senators Jack Reed (D-RI) and Sheldon Whitehouse are teaming up with U.S. Senator Dick Durbin (D-IL), Chairman of the Senate Judiciary Committee, in pressing the ten largest Bitcoin ATM (BTM) operators to curb fraud against elderly Americans using their products.  The Senators are asking the crypto kiosk firms for information to better understand what fraud prevention actions these companies are taking.

Durbin, Reed and Whitehouse, along with U.S. Senators Richard Blumenthal (D-CT), Tina Smith (D-MN), Elizabeth Warren (D-MA), and Peter Welch (D-VT) sent a letter to BTM companies Athena Bitcoin, Bitcoin Depot, Bitstop, Byte Federal, Cash2Bitcoin, CoinFlip, Coinhub, Margo, RockItCoin, and Unbank, urging: “We write to call on you to take immediate action to address troubling reports that your Bitcoin ATMs (BTMs) are contributing to widespread financial fraud against elderly Americans.  Cryptocurrencies, including Bitcoin, have long been associated with criminal activity.  The relative anonymity and irreversibility of cryptocurrency transactions has made them particularly attractive to fraudsters.  As companies like yours have staged BTMs in a variety of businesses—sometimes even paying businesses to host your BTMs—there has been a marked increase in Bitcoin scams impacting elderly Americans.”

The companies that own the Bitcoin ATMs pay local small businesses a monthly fee – usually a few hundred dollars per month – to house the BTMs in their storefronts.  After seeing innocent people in their stores repeatedly victimized by scammers, some trusted small businesses have gotten rid of Bitcoin ATM machines.  In Rhode Island, there are 119 Bitcoin ATMs located throughout the state, according to Coin ATM Radar.  The kiosks are located in places like gas stations, vape shops, and convenience stores. 

In their letter, the Senators cited a 2021 FBI Public Service Announcement, writing: “As BTMs have become more prevalent and accessible, they increasingly have become a favored tool of criminals looking to prey upon elderly Americans … This scheme has played out time and again in cities and towns across the United States.  Earlier this summer, a small business owner in Springfield, Illinois, reported that a Coinhub BTM in his store repeatedly had been used by elderly individuals to deposit large sums of money at the urging of fraudsters … Similar scenarios have played out in Texas, California, and seemingly every other state in the country.”

The Senators then highlighted recent Federal Trade Commission data showing the massive scope and dramatic rise in BTM scams, writing: “Between 2020 and 2023, the amount consumers reported losing in this form of fraud increased by nearly tenfold—from $12 million to $114 million.  In the first half of this year alone, victims lost a whopping $65 million.  And criminals are targeting elderly Americans, with people age 60 and older more than three times as likely to report a loss using a BTM than younger adults.”

The Senators concluded by urging action, followed by a series of information requests to be responded to by October 4, 2024, writing: “While the actions of these good Samaritans [to try to step in] are laudable, they do not absolve [your company] from taking all requisite steps to ensure your BTMs are not used to perpetuate fraud. To better understand what actions [your company] is taking to address this problem and what legislation may be necessary, we ask that you respond to the following questions.”

“As the financial world evolves, so too does the criminal underworld, and federal regulators and law enforcement must keep pace,” said Senator Reed.

“Bad actors are using increasingly advanced tactics to swindle vulnerable Rhode Island seniors,” said Senator Whitehouse.  “This predatory behavior must stop, and I’m committed to doing everything I can to hold fraudsters accountable and implement safeguards against scammers trying to steal seniors’ life savings.”

Senator Reed has introduced bipartisan legislation (S. 2355, the CANSEE Act) with Senators Rounds (R-SD), Warner (D-VA), and Romney (R-UT) to require crypto kiosk operators to verify the identities of each user and counterparty to every transaction.  By prohibiting anonymous transactions at crypto kiosks, this legislation would stop criminals from using crypto to engage in scams against innocent consumers and would crack down on the use of crypto kiosks to launder money derived from drug trafficking, human trafficking, and other illegal activity.

Full text of the letter follows:

September 11, 2024

Matias Goldenhörn

Chief Executive Officer

Athena Bitcoin

1 SE 3rd Avenue Suite 2740

Miami, FL 33131

Dear Mr. Goldenhörn:

We write to call on you to take immediate action to address troubling reports that your Bitcoin ATMs (BTMs) are contributing to widespread financial fraud against elderly Americans. Cryptocurrencies, including Bitcoin, have long been associated with criminal activity. The relative anonymity and irreversibility of cryptocurrency transactions has made them particularly attractive to fraudsters. As companies like yours have staged BTMs in a variety of businesses—sometimes even paying businesses to host your BTMs—there has been a marked increase in Bitcoin scams impacting elderly Americans. In light of these troubling reports, Athena Bitcoin must take all necessary steps to address this trend.

While Bitcoin has existed since 2009, BTMs only recently became widely available.  These kiosks, which allow individuals to buy or sell Bitcoins with deposited cash, were first introduced in 2013. While only approximately 1,200 BTMs were available in the United States at the end of 2017, that number has since grown to over 32,000.  Today, BTMs are found in a variety of supermarkets, convenience stores, gas stations, restaurants, liquor stores, and laundromats.

As BTMs have become more prevalent and accessible, they increasingly have become a favored tool of criminals looking to prey upon elderly Americans. A 2021 FBI Public Service Announcement described the common features of this fraud. “The scammer often requests payment from the victim and may direct the victim to withdraw money from the victim’s financial accounts, such as investment or retirement accounts. The scammers provide a QR code associated with the scammer’s cryptocurrency wallet for the victim to use during the transaction.  The scammer then directs the victim to a physical cryptocurrency ATM to insert their money, purchase cryptocurrency, and use the provided QR code to auto-populate the recipient address. Often the scammer is in constant online communication with the victim and provides step-by-step instructions until the payment is completed.”

This scheme has played out time and again in cities and towns across the United States. Earlier this summer, a small business owner in Springfield, Illinois, reported that a Coinhub BTM in his store repeatedly had been used by elderly individuals to deposit large sums of money at the urging of fraudsters. As he explained, “Scammers find these vulnerable people that aren’t up on the latest technologies and they scare them on the phone, they tell them they are from the bank or the FBI and they are being watched, and they need to drop the money into this bitcoin machine.”  Similar scenarios have played out in Texas, California, and seemingly every other state in the country.

According to data recently released by the Federal Trade Commission, BTM scams have exploded in recent years. Between 2020 and 2023, the amount consumers reported losing in this form of fraud increased nearly tenfold—from $12 million to $114 million. In the first half of this year alone, victims lost a whopping $65 million. And criminals are targeting elderly Americans, with people age 60 and older more than three times as likely to report a loss using a BTM than younger adults.

Small business owners and everyday citizens have tried to step in and stop this increasing criminal activity on BTMs. The aforementioned small business owner in Springfield had the BTM removed from his store; another Springfield shop owner taped a fraud warning to the screen of the BTM in his shop; and a good Samaritan in Texas called 911 to enlist police assistance to stop an elderly woman in her 80s from depositing $40,000 of her savings in the Bitcoin wallet of a criminal.

While the actions of these good Samaritans are laudable, they do not absolve Athena Bitcoin from taking all requisite steps to ensure your BTMs are not used to perpetuate fraud.

To better understand what actions Athena Bitcoin is taking to address this problem and what legislation may be necessary, we ask that you respond to the following questions no later than October 4, 2024:

1. Does Athena Bitcoin display a warning or other notification to customers that BTMs have been used to perpetuate fraud?

2. What form of identification, if any, does Athena Bitcoin require a customer to provide when making a deposit or other transaction? Does the form of identification differ depending on transaction size?

3. Does Athena Bitcoin have a minimum or maximum amount on the transaction size permitted on one of your BTMs?

4. Does Athena Bitcoin limit the amount an individual can deposit or transfer in a single day, week, or other period of time?

5. What is the average deposit and average transfer on an Athena Bitcoin BTM?

6. Does Athena Bitcoin hold deposited and transferred funds for any period of time or take any other measures to allow transactions to be reversed in the case of fraud or mistake?  If not, does Athena Bitcoin warn customers that funds deposited in or transferred to another individual’s Bitcoin wallet cannot be recovered even if the transaction was the result of fraud or mistake?

7. Does Athena Bitcoin insure depositors against fraud?

8. What customer support does Athena Bitcoin offer if an individual is defrauded?

We look forward to your prompt response.

Sincerely,