Crypto ATMs are a Growing Channel for Fraud

Last month, the Federal Trade Commission put out a warning to consumers about the risks associated with Bitcoin “ATMs,” kiosks where consumers can deposit cash for cryptocurrency. Fraud.org has also tracked this issue over the past couple of years and reached a similar conclusion: crypto ATMs are becoming one of the scammers’ favorite new payment methods. 

Cryptocurrency kiosks (also called Bitcoin ATMs or BTM, even though they may connect with other cryptocurrencies) seem like they should be a simple idea. They are physical machines that individuals can use to deposit and withdraw cash to and from their crypto wallets. The reality is a bit more complicated—and risky.  

Magnets for fraud. These kiosks have attracted enormous attention from scammers. Typically, bad actors impersonate a government entity or business and convince their victim to withdraw cash from their bank account, often by scaring the individual into thinking their money is at risk unless they act quickly. Then, they guide their target into depositing the cash into a nearby BTM. The victim believes they have secured their money when, in reality, they placed it in a fraudster’s crypto wallet. 

High fees. Consumers have reported transaction fees ranging from 10% to 25% when depositing cash in these machines. These fees are significantly higher than what legitimate banks and investment vehicles charge. Legitimate banks also offer better safeguards for consumers’ deposits. High fees can also prohibit the acquisition of cash from BTMs. Many BTM locations do not allow withdrawals at all. This can be especially frustrating for consumers trying to reverse a deposit made in error. 

Predatory deployment. There’s a body of evidence that the companies behind these machines target localities with greater proportions of lower-income and minority populations. Crypto kiosks are often found in locations like laundromats, smoke shops, and convenience stores—establishments lacking the security and employee expertise consumers deserve when dealing with banking and financial services. 

If someone is pushing you to make a deposit at a BTM, keep the following tips in mind: 

• Legitimate government officials and businesses will never ask you to deposit cash in a cryptocurrency kiosk. They just won’t. 
• Don’t withdraw cash in response to an unexpected call or message. If there truly is an emergency, your money is safest in an FDIC-insured bank account, not a crypto wallet.  
• Check the details of the receiving wallet before depositing cash. Make sure you are depositing your money into your own crypto wallet, not someone else’s. If you have not set up a cryptocurrency wallet before or you are not sure if you have a crypto wallet, do not use these kiosks. 
• Don’t share information related to your crypto wallet with anyone. Treat information about your crypto wallet like bank information. Make sure you don’t leave behind transaction receipts, as they may contain sensitive information about your wallet. Do not share the private key for your crypto wallet (which may be printed on the receipt you receive from a BTM) with anyone.