Simply put
- Authorities sometimes use force to seize cash from Bitcoin ATMs.
- The seized funds are reportedly owned by Bitcoin Depot, according to the company’s CLO.
- In 2024, Americans lost at least $247 million through Crypto Kiosks, a report by the FBI revealed.
According to Chris Ryan from Bitcoin Depot, US law enforcement actions to forcibly obtain cash from Bitcoin ATMs may be exceeding their powers and could be illegal.
Ryan mentioned that the funds in question rightfully belong to a Bitcoin ATM provider based in Atlanta. They are also liable for any damages incurred by the ATM, even if it’s to return a large sum to consumers who believe they were scammed.
“These officers, perhaps honestly, think they are helping consumers,” Ryan stated. “But, in reality, they are creating more victims, which include us, by damaging our property and seizing our cash.”
Recently in Texas, law enforcement used power tools to obtain $32,000 from a Bitcoin Depot kiosk. They also physically dismantled the machine, which, according to Bitcoin Depot COO Scott Buchanan, means they will have to replace it entirely. Each Bitcoin Depot kiosk costs about $14,000 under their profit-sharing initiative.
“In most cases, the police just break in without warning,” Buchanan commented.
Buchanan mentioned that Bitcoin Depot will always unlock the machine if authorities attempt to confiscate funds. Yet, if law enforcement causes damage to their property, the company seeks compensation, although municipalities often lack the resources to cover these costs, Ryan noted.
“Usually, we don’t get anything back,” he remarked.
Sheriff Chuck Hebbard from Jasper County stated he can’t discuss the pending lawsuits surrounding these incidents.
Scammers exploit the irreversible nature of Bitcoin transactions, leading to significant losses for individuals. The FBI’s report indicated that Americans lost around $247 million to crypto kiosks in 2024, marking a 31% increase from the previous year.
A user typically enters cash into a Bitcoin ATM, after which Bitcoin Depot converts that cash into Bitcoin for the user. To complete the transaction, the user provides a wallet address to receive their Bitcoin. Scammers often fool victims by supplying fraudulent wallet addresses, leading them to believe they are receiving legitimate Bitcoin.
While Ryan expressed sympathy for those scammed, he emphasized that Bitcoin Depot has the right to retain cash, suggesting that some law enforcement officers don’t fully grasp the company’s business model or that it’s genuinely the customer’s Bitcoin that is being stolen.
Confusion can arise when authorities execute warrants that misrepresent the victims’ lost cash as criminal proceeds. In one year, Bitcoin Depot was subjected to fund seizures from their kiosks up to 20 times, with Ryan stating most of these cases did not involve forceful measures.
“Some don’t even go through the warrant process,” Ryan added. “They’ll simply call us to say, ‘We’re about to break into your machine.’”
States have their own laws, and a recent Iowa Supreme Court case ruled that Bitcoin Depot had a right to the cash of victims, since the terms of service state that depositors must own a digital wallet for Bitcoin. Bitcoin Depot warns users that third-party addresses may be fraudulent.
The spokesperson for Bitcoin Depot highlighted that they have successfully fought similar illegal actions by law enforcement in states like North Carolina, Virginia, and Mississippi. They filed lawsuits, including one against Wood County, Wisconsin, over seized funds.
The Internet Crime Complaint Center (IC3) reported a rise in fraud related to crypto ATMs in a 2021 public service announcement, cautioning that such practices could leave many victims at a loss.
In February, Pennsylvania Attorney General Dave Sunday warned that recovering funds lost in fraud cases involving Bitcoin ATMs is virtually impossible.
Bitcoin Depot is reportedly collaborating with local law enforcement to trace victims’ cryptocurrency, using tools from analytics firm Elliptic for transaction tracking. Their team, comprising former law enforcement officials, aids local governments and guides victims through the process of filing complaints.
“While the physical destruction of our property is hopefully a rare occurrence, it underscores the lack of understanding some have regarding how cryptocurrency operates,” Ryan noted.
