Bitcoin ATMs are increasingly involved in cryptocurrency scams, according to the Delaware Department of Justice's Investor Protection Unit. The Federal Trade Commission reports that consumers lost over $110 million to Bitcoin ATM scams in 2023, marking a 1000% increase since 2020.
Bitcoin ATMs, also known as Crypto ATMs or Crypto Kiosks, are electronic kiosks designed for purchasing cryptocurrencies using financial transaction cards like debit cards. These machines resemble traditional ATMs and are often found in high-traffic areas such as gas stations and malls.
The process involves depositing money into the ATM, which then converts it into cryptocurrency and deposits it into an electronic wallet. Users typically incur substantial fees for these transactions.
Despite their convenience, Bitcoin ATMs have become central to crypto scams. "The scams start through chats, social media, emails, texts, pop-ups and phone calls from strangers," warned AG Jennings. Scammers create urgent reasons for victims to withdraw cash and deposit it into a Bitcoin ATM under false pretenses of lucrative investments with minimal risk. "If it sounds too good to be true, it is."
Victims may be instructed to input an electronic wallet address or scan a QR code linking to the scammer's wallet. Once transferred, scammers quickly move the crypto assets, making recovery difficult.
To protect against such scams, the DOJ’s Investor Protection Unit advises:
- Avoid clicking on links from unknown sources or responding directly to unexpected communications.
- Verify any suspicious messages by contacting the purported sender independently.
- Do not rush; consult someone you trust before proceeding with any offers.
- Be wary of anyone insisting on using a Bitcoin ATM for security or investment purposes.
- Recognize red flags if told information must remain secret.
Most Bitcoin ATMs do not limit daily transactions or verify user identities and lack fraud prevention measures. They also charge high fees and are not registered with regulatory bodies.
Those defrauded via Bitcoin ATMs should report incidents to the Investor Protection Unit at 302-577-8424 or Investor.Protection@delaware.gov.