Cryptocurrency ATMs and Fraud

Cryptocurrency ATMs, often referred to as “Bitcoin ATMs,” and virtual currency kiosks are found in grocery stores, gas stations, convenience stores, and malls. Regardless of the name, they look and operate like traditional bank ATMs. However, these ATMs allow individuals to purchase and send virtual currencies, like Bitcoin, Ether, and Tether, to other parties anywhere in the world instantaneously.

Cryptocurrency Fraud

Traditionally, a fraudster would convince an unsuspecting victim to send fiat currency via wire transfers, gift cards, P2P digital transfer, etc. Now, fraudsters direct victims to send virtual currency via cryptocurrency ATMs. The fraudster typically instructs the victim to withdraw fiat currency from their financial institution and deposit it into a cryptocurrency ATM, providing the victim with a QR code linked to a wallet controlled by the fraudster. As noted above, tactics may vary, but the goal is to gain a victim’s trust, create a false sense of security, and fabricate an urgent situation that requires the victim’s help or demands payment. The fraudster directs the victim to deposit cash into a virtual currency ATM and purchase virtual currency, which is then sent to the fraudsters’ virtual currency wallet.

Once this is done, the money is essentially gone. Therefore, it is crucial to understand the difference between making a cash deposit at a traditional financial institution ATM and at a cryptocurrency ATM. A traditional fiat currency deposit goes directly into a known party's bank account (controlled by a financial institution) or even into your own account. However, in this fraud, the cryptocurrency ATM deposit goes into an anonymous or un-hosted wallet address controlled by an unknown party. If using a cryptocurrency ATM, the user must only deposit funds into a wallet controlled by the user to avoid becoming a victim.

Preventative Measures

• Invest with reputable exchanges and wallets with a long user history.
• Do not deposit cash in a crypto ATM in exchange for a QR code.
• Do not permanently link cryptocurrency brokerage accounts to traditional bank accounts.
• Do not respond to unsolicited messages about investing in cryptocurrency.
• Enable multi-factor authentication on accounts associated with crypto wallets or exchange platforms.
• Be wary of the personal information you post online, and constantly update your privacy settings on all social media platforms.
• Use strong password management and set up two-factor authentication.
• Understand that there are no get-rich-quick schemes; if it sounds too good to be true, it is.
• Genuine investment companies will never call you, so be extremely cautious with anyone you do not know who calls with an opportunity to increase your wealth.
• Before investing in any type of opportunity, take the time to research and talk to people you trust, such as family, friends, or advisors.
• Never send money to someone you have never met in person, and always seek advice from someone you trust before sending money to someone you recently met or started a relationship with online, especially if the relationship is remote or primarily through text/chat app/phone.
• Be wary of anyone asking you to receive money on their behalf and then later transfer it.
• You cannot win a lottery you have not entered, and legitimate lotteries will never ask for money upfront.
• Do not trust people who promise you can quickly or easily make money in the cryptocurrency markets.
• If you meet someone on a dating site, app, or social media, and they want to show you how to invest in crypto or ask you to send them cryptocurrency, it is a fraud.
• Beware of fraudulent schemes leveraging cryptocurrency ATMs and QR codes to facilitate payment.
• Do not send payment to someone you have only spoken to online, even if you believe you have established a relationship with the individual.
• Do not follow instructions from someone you have never met to scan a QR code and send payment via a physical cryptocurrency ATM.
• Do not respond to a caller claiming to be a representative of a company where you are an account holder and who requests personal information or demands cryptocurrency. Contact the number listed on your card or the entity directly for verification.
• Do not respond to a caller from an unknown telephone number who identifies as a person you know and requests cryptocurrency.
• Practice caution when an entity states they can only accept cryptocurrency and identifies as the government, law enforcement, a legal office, or a utility company. These entities will likely not instruct you to wire funds, send checks, send money overseas, or make deposits into unknown individuals’ accounts.
• Avoid cryptocurrency ATMs advertising anonymity and only requiring a phone number or e-mail. These cryptocurrency ATMs may be non-compliant with US federal regulations and may facilitate money laundering. Instructions to use cryptocurrency ATMs with these specific characteristics are a significant indicator of fraud.
• If you are using a cryptocurrency ATM and the ATM operator calls you to explain that your transactions are consistent with fraud and advises you to stop sending money, you should stop or cancel the transaction.