TDCI’s Securities Division Highlights Proactive Investor Protection Tips for Bitcoin ATMs
Real world bitcoin ATMs are playing a bigger role in the proliferation of online Bitcoin scams than ever before. Data from the Federal Trade Commission shows consumers reporting over $110 million in losses to scams involving Bitcoin ATM machines in 2023, a tenfold increase since 2020.
As bitcoin’s use and popularity continues to grow, the Tennessee Department of Commerce & Insurance’s (TDCI) Securities Division is raising awareness about the proliferation of these scams which are costing their hard-earned money.
What are Bitcoin ATMs?
A Bitcoin ATM (also known by a number of other names, including Crypto ATM) is an electronic kiosk designed to facilitate buying cryptocurrencies using any financial transaction card, including a cash or a debit card. These machines look like traditional ATMs and are located in all the same kinds of places: gas stations, convenience stores, malls, and other high-traffic areas.
How do they work?
You can deposit money into the Bitcoin ATM, and the Bitcoin ATM charges a fee and transfers the money into cryptocurrency and puts it into an electronic wallet. You provide the address of the wallet.
Using Crypto ATMs to facilitate scams
While these machines provide convenient access to digital currencies, Bitcoin ATMs are increasingly being used as key player in crypto or Bitcoin scams.
The scams start through chats, social media, emails, texts, pop-ups and phone calls from strangers. The lies told by scammers vary, but they create some urgent justification for consumers to take cash out of their bank accounts and put it into a Bitcoin ATM. Often, the scammers fabricate an investment that promises great returns with limited risk.
When the consumers move their money into the Bitcoin ATM, the ATM converts the money to cryptocurrency. The consumer then types in the scammer’s electronic wallet address, or the consumer is given a QR code to scan which points to the scammer’s electronic wallet address.
The Bitcoin ATM then transfers the crypto to the scammer’s electronic wallet. Once in their control, the scammers quickly move the crypto making it very difficult to trace and recover.
How to Protect Yourself
Bitcoin investors should take these proactive measures to avoid scammers:
- Never click on links or respond directly to unexpected calls, messages, or computer pop-ups. If you think it could be legitimate, contact the company or agency, but look up their number or website yourself. Don't use the phone number the caller or message gave you.
- Slow down. Scammers want to rush you, so stop and check it out. Before you do anything else, talk with someone you trust.
- Never withdraw cash in response to an unexpected call or message. Only scammers will tell you to do that.
- Don’t believe anyone who says you need to use a Bitcoin ATM to protect your money, to fix a problem, or to get in a great investment. Real businesses and government agencies will never do that – and anyone who asks this is a scammer.
Be cautious if someone tells you something is a secret, or information cannot be shared with anyone. This is a method used by scammers that is a red flag because it isolates individuals from trusted resources. Remember, most Bitcoin ATMs do not:
- Limit daily transaction amounts so there’s no limit to how much you can lose in a day.
- Collect know-your-customer information for account holders so no one is verifying who you are sending crypto to but you.
- Pause or have a resting period on transactions (such as 72 hours) so your assets are transferred away immediately.
- Have any registrations of the ATMs with the government so government agencies have a hard time providing help.
- Have any fraud prevention or reimbursement policy.
- Provide details about the transaction and where assets are being sent on the receipts.
- Limit transaction fees which can be very high.
Rachel Carden serves as the Director of Investor Education for the Tennessee Department of Commerce and Insurance’s Securities Division.
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