Encryption ATM machines become new tools for fraud: 28,000 outlets spread across the U.S., defrauding 240 million dollars in six months.

Written by: Cameron Fozi, Chloe Rosenberg, and Reeno Hashimoto, The New York Times

Compiled by: Chopper, Foresight News

Cryptocurrency ATMs located in convenience stores and gas stations, which seem to be convenient cash-to-coin terminals, have actually become traps for scammers targeting the elderly. Behind the disappearing deposits are meticulously designed scams.

Mary Handeland, a real estate agent in Grafton, Wisconsin, met a match on a dating app last year. The other party, who goes by the name Mike, is an engineer at a defense contractor in Texas.

After two months of communication through text messages and phone calls, 71-year-old Handeland received Mike's confession. Shortly after, Mike asked her for a loan.

Handeland was asked to deposit cash into a device called a “cryptocurrency ATM.” These self-service terminals are common in grocery stores, gas stations, and tobacco shops, resembling traditional ATMs but capable of exchanging cash for cryptocurrency.

Since October last year, Handeland deposited $98,300 into these machines through 19 transactions. In the end, all the money disappeared, and Mike also vanished, while this identity was fictional from the beginning to the end.

“I still don't know what was wrong with me at the time,” Handeland said, “that feeling of being manipulated was like being caught in some kind of whirlpool.”

Handeland's experience has brought cryptocurrency ATMs into the spotlight. These devices have rapidly gained popularity across the United States, but have come under close scrutiny for becoming tools for fraud. Data from the U.S. Department of the Treasury's Financial Crimes Enforcement Network shows that the number of operational cryptocurrency ATMs has reached at least 28,000, more than twice the number of Wells Fargo ATMs.

Mary Handeland deposited $98,300 into a cryptocurrency ATM in 19 transactions, and it ultimately disappeared.

These self-service terminals operated by companies such as Bitcoin Depot, CoinFlip, and Athena Bitcoin help people exchange cash for cryptocurrency at physical locations. After users deposit cash, the operator transfers the corresponding amount of cryptocurrency to the user's cryptocurrency account and charges a transaction fee.

However, law enforcement agencies stated that these self-service terminals have become breeding grounds for financial crime. Last year, the FBI's Internet Crime Complaint Center received nearly 11,000 complaints related to these devices, with total losses amounting to $246.7 million. The FBI estimates that in the first seven months of this year, losses from fraud involving cryptocurrency ATMs amounted to approximately $240 million.

The cryptocurrency industry has long been mired in money laundering and fraud scandals, with crimes related to ATMs being just one aspect. However, Aidan Larkin, the CEO of asset tracking company Asset Reality, points out that the uniqueness of such devices lies in their easy accessibility and their targeting of vulnerable groups.

“For victims with lower technical skills and lacking experience in using technology products, cryptocurrency ATMs are the easiest way for scammers to extract their assets,” he said.

According to data from the cryptocurrency analysis company TRM Labs, the proportion of illegal transactions involving cryptocurrency ATMs in the first half of 2024 to 2025 is more than 17 times the average level of the entire cryptocurrency industry.

Since the birth of Bitcoin in 2009, such devices began to appear in cafes, convenience stores, and gas stations. Bitcoin Depot was founded in 2016, and its founder, Brandon Mintz, had just graduated from college at that time. He stated that the original intention of starting the company was to build a network of cryptocurrency ATMs, allowing people without bank accounts or those who find it difficult to purchase cryptocurrencies through other channels to access Bitcoin.

A Bitcoin ATM in a convenience store in Miami. According to data from the U.S. Department of the Treasury, cryptocurrency ATM operators are present in at least 28,000 locations.

In 2023, Bitcoin Depot went public through a merger with a special purpose acquisition company (SPAC). The company stated that it operates over 9,000 ATMs, making it the largest cryptocurrency ATM network in North America. Since its establishment, the company has processed 4 million transactions with a total transaction volume of $3.3 billion.

However, law enforcement agencies claim that once cash is exchanged for cryptocurrency through these machines, the fraudsters can transfer this cryptocurrency to jurisdictions that are beyond the reach of U.S. law enforcement, making it nearly impossible for victims to recover their losses.

Several states, including California and Illinois, have begun to restrict the use of cryptocurrency ATMs, with some states setting limits on transaction amounts and fees charged by operators.

In 2023, when California discussed whether to limit cryptocurrency ATMs, Alexander Gammelgard, then president of the California Police Chiefs Association, warned state legislators in a letter about the dangers of such devices and supported related regulatory proposals.

He wrote in the letter: “These devices enable international criminal organizations to steal funds from California residents without any involvement from banks or financial institutions, which could have assisted law enforcement in capturing criminals and recovering stolen property.”

In the same year, California passed a series of regulatory provisions that limit the daily transaction amount for individuals using cryptocurrency ATMs to $1,000, with a fee cap set at $5 or 15% of the transaction amount (whichever is higher).

Many cryptocurrency ATM operators have stated that fraud-related transactions account for only a tiny proportion. Chris Ryan, the Chief Legal Officer of Bitcoin Depot, told Texas lawmakers this year that fraudulent transactions make up 2% to 3% of the company's total transactions in the U.S. The company stated in a press release that protecting consumers is its top priority and that it has one of the most comprehensive compliance programs in the industry.

Byte Federal, which operates over 1,200 cryptocurrency ATMs, stated that from July 2024 to the first half of 2025, the proportion of transactions involving scam victims was only 1.2%. The company's CEO, Paul Tarantino, mentioned that for registered users aged 60 and above, the company proactively calls to remind them of potential scam risks, successfully preventing over 80% of suspicious transactions.

Paul Tarantino, the CEO of cryptocurrency ATM operator Byte Federal, stated that the company will call customers aged 60 and above upon registration to remind them to be aware of potential scams.

Many cryptocurrency ATM operators have also posted scam warnings on their devices, asking users to confirm that the funds they deposit are being transferred to their own cryptocurrency accounts, rather than to accounts managed by others. They also stated that they would cooperate with law enforcement.

Sung Choi, the Chief Operating Officer of Coinme, a company that provides software support for ATMs, stated that the Seattle-based company is continuously improving its ability to identify and prevent potential fraudulent transactions, but scammers are still able to find ways to circumvent anti-fraud measures.

“No matter how hard we try, the tactics of scammers are quite sophisticated, and they always seem to be one step ahead.” said Sung Choi.

Athena Bitcoin states that it will work to prevent fraud but cannot control user decisions, just as banks are not responsible for users withdrawing money and transferring it to others. CoinFlip, on the other hand, claims that it is committed to anti-fraud efforts and has high standards for compliance and transparency.

For victims of scams induced to use such devices, the consequences can be devastating. In 2022, Connie Ruth Morris, a retired nurse from Amarillo, Texas, began receiving text messages from someone claiming to be Boaventura after joining the online fan group of Brazilian actor and singer Daniel Boaventura.

After a few days of texting, the other party confessed to 72-year-old Morris and asked her to transfer money through a cryptocurrency ATM to help him pay off personal debts, so that they could jointly purchase property.

Morris, who has been married for over 45 years, agreed to the other party's request. She said that over a period of about six months, she deposited around $300,000 through cryptocurrency ATMs, and also sent four iPhone phones and a $200 gift card.

In May 2023, Morris informed her husband that she was leaving him to be with Boaventura. Their son told her that she had been deceived.

At that time, most of the family's savings had already disappeared. And Morris and her husband later divorced.

“I was brainwashed too severely at that time, I had already detached from reality,” she said, “I used to always be able to help my son and grandchildren, but now I can't do it anymore.”