Unregulated crypto-ATMs give criminals a loophole to prey on unsuspecting victims

Crypto ATMs, or kiosks, are increasingly being used as a tool for fraud across the country. The machines are often unregulated and unregistered, providing a loophole for criminals to take advantage of unsuspecting victims.

In October 2021, artist Joe Samuels thought he contacted the computer company’s IT department. During the conversation, he gave someone access to remotely fix his computer, which seemed to work.

A few months later, however, he received another call from someone claiming to be from the same IT department. They told him they had mistakenly deposited $20,000 into his checking account and demanded he send it back through a Bitcoin ATM.

“And they’re telling me, calling me. ‘You have to pay us back. Or we’re going to get the FBI,'” said Samuels, who is 84.

Fearing for his safety, Samuels complied and deposited $20,000 in cash at a Bitcoin of America kiosk near his apartment in Hartford, Connecticut. Five days later he discovered that fraudsters had actually moved his own money from the savings account to the checking account.

The crypto kiosk that Samuels used was confiscated, but Samuels paid the price: he spent a week in the hospital and two years later, he has not been able to get the money back. He now lives with his son as he cannot afford to live alone.

“That’s what I have to deal with. But again, you know, I feel very lucky. I take the opportunity to just paint. And put the work away,” Samuels said.

Right now, there are around 32,000 crypto ATMs and kiosks across the country – up from 1,200 in 2018. Although they look like regular ATMs, they convert cash into digital cryptocurrency that goes into a digital wallet instead of a traditional bank account.

Bitcoin of America, accused of helping fraudsters who stole millions from victims using its kiosks, faces charges of conspiracy and money laundering along with its CEO and two others. The kiosks were reportedly unlicensed and profitable in Ohio.

Bitcoin of America CEO Sonny Meraban was arrested in Miami earlier this month and charged with crimes including money laundering and conspiracy.

According to Connecticut State Police Detective Matthew Hogan, who specializes in financial crime and cryptocurrency, some of these machines are safe for consumers. But he warns that due to the lack of regulation around them, many are being used for fraud or crimes such as money laundering. Hogan also believes that they are deliberately placed in areas with high crime.

“I think they’re strategically placed on purpose because they get a higher percentage of use in those high-crime locations,” Hogan said.

CNET cybersecurity expert Bree Fowler warns that crypto ATMs pose a unique risk because many are unregulated and unlicensed.

“They’re, you know, on some levels no different than a soda machine or a candy machine. If you see one of those things, just don’t use them right now,” Fowler said.

CBS News reached out to Bitcoin of America for comment on the indictment. The company has not responded, nor has the CEO responded to requests for comment. Bitcoin of America’s website has also been shut down.

Before the indictment against Meraban, the company claimed in court that it had given Samuel’s money to a third party whose identity remains unknown. A judge ordered that Samuel’s money be turned over to Bitcoin of America. But now that the company is facing legal trouble, Samuel’s family is considering suing Bitcoin of America to recover lost funds.