California’s Department of Financial Protection and Innovation (DFPI) has ordered Coinflip, a leading bitcoin ATM operator, to pay over $4.8 million in restitution to residents who fell victim to scams involving the company’s kiosks. The ruling also requires Coinflip to return more than $350,000 in fees that the regulator determined were illegally charged to customers. Coinflip operates approximately 500 bitcoin ATMs across California, frequently found in grocery stores, gas stations, and convenience stores.
Findings from the Investigation
The DFPI determined that Coinflip, since 2021, failed to properly identify and verify users of its kiosks, exposing customers—many of them older adults—to significant risk of fraud. The investigation found that the company did not adequately detect, prevent, or report suspicious transactions and, in some instances, processed transactions that exceeded California’s $1,000 daily per customer limit.
Regulators also stated that Coinflip did not consistently provide written disclosures before transactions, and some customer receipts were found to be incomplete. The DFPI cited violations of the Digital Financial Assets Law, federal anti-money laundering requirements, and the California Consumer Financial Protection Law. Coinflip was ordered to immediately stop practices deemed unlawful, unfair, deceptive, or abusive.
“Robust anti-fraud and consumer-protection practices are a requirement of doing business in California, not a suggestion,” said DFPI Commissioner KC Mohseni, emphasizing the agency’s commitment to enforcing compliance.
Kiosk transactions processed through Coinflip are immediate, irreversible, and often challenging for victims to trace. According to the Federal Trade Commission, scammers frequently pose as officials, business representatives, or tech support staff to convince victims that their accounts are compromised or their computers are at risk.
Elderly Users at Higher Risk
These scams often begin with impersonators sending false warnings to potential targets. Victims are persuaded to withdraw cash and deposit it at a nearby kiosk. Using a QR code supplied by the scammer, the purchased bitcoin is transferred directly to the scammer’s wallet.
In the first half of 2024, impersonation schemes accounted for about 86% of all fraud loss reports linked to crypto kiosks in California. People aged 60 and older represented nearly 71% of the reported losses during this timeframe.
State Actions on Crypto ATM Scams
California’s action comes amid a broader nationwide crackdown on crypto ATM-related scams. Other states, including Arizona, Alabama, and Ohio, have implemented initiatives to help scam victims reclaim lost funds.
In August, Arizona secured full refunds totaling $171,332 for 35 victims who had used a crypto ATM operator for less than 10 days and reported the fraud within 30 days, providing proof of the scam.
Alabama introduced new refund rules on October 1. Under these regulations, qualifying new customers can receive a full refund plus all fees, while existing customers may recover half the lost transaction amount and all fees. Both groups must report incidents within 60 days to be eligible.
In Ohio, local authorities traced and froze $15,300 after a 63-year-old woman was defrauded through a crypto ATM impersonation scam involving fake Microsoft support. The victim’s funds were returned after collaboration between investigators and the Allen County Prosecutor’s Office.
Coinflip is not the only operator facing increased scrutiny. California has previously shut down other players such as Hermes Bitcoin and imposed financial penalties on firms including RockItCoin, Coinme, and Coinhub. The DFPI also runs a Crypto Scam Tracker to collect and act on fraud complaints from the public.
Mini dictionary: Coinflip is a major US-based crypto ATM operator that allows users to buy and sell cryptocurrencies at physical kiosks. Their machines provide on-the-spot digital asset transactions but have faced regulatory scrutiny for compliance lapses regarding consumer protection and anti-fraud measures.
| State | Refund/Action | Conditions/Requirements |
|---|---|---|
| California | $4.8 million to scam victims, $350,000 in refunded fees | State order, identified scams tied to Coinflip ATMs |
| Arizona | $171,332 full refunds to 35 victims | Used ATM operator fewer than 10 days, reported within 30 days with proof |
| Alabama | Full or half refunds plus fees | Report within 60 days; full refund for new customers, half for existing |
| Ohio | $15,300 returned to one victim | Funds traced and frozen after fake Microsoft scam |
