The Iowa Supreme Court has ruled that money paid into a Bitcoin Depot ATM as part of separate scams must be returned to the company, and not to the victims, reversing a lower court ruling.
The two scams happened in July 2023 and February 2024, when the corresponding victims were separately contacted by scammers and coerced into transferring Bitcoin worth $14,000 via a Bitcoin Depot ATM in Linn County.
Police had seized the deposited cash as part of their investigations but were unable to retrieve the transferred BTC.
A district court had ruled that the seized cash, totalling $28,000, should be returned to the victims, prompting Bitcoin Depot to appeal to the Iowa Supreme Court.
According to the ruling from Justice Dana Oxley, the victims entered into a contract with Bitcoin Depot ATM, which warned the victims about potential scams prior to the transfer of the purchased BTC.
The victims had specified that they owned the wallets to which they were sending BTC, since this is the only way of completing a transfer using Bitcoin Depot ATMs.
However, one victim, Carrie Carlson, argued that the contract she’d entered into with Bitcoin Depot should be voided, since she was acting under duress.
But the Iowa Supreme court ruled that the company had no way of knowing that Carlson and the other victim were acting under duress, with Judge Oxley rejecting Carlson’s arguments that the warning shown by Bitcoin Depot was evidence of prior knowledge.
“Here, the fact that Bitcoin Depot recognized risks in its industry and the use of its ATMs and then warned its customers—to the point of barring a transaction unless the user certifies that the wallet is their own—does not make it liable for every improper transaction,” she wrote.
The court has therefore ruled to “remand the case with instructions to return the seized funds to Bitcoin Depot,” leaving the victims out of pocket.
Bitcoin Depot told Decrypt that the decision supports the importance of due process and reinforces the role crypto operators can play in preventing and addressing fraud.
“Bitcoin Depot respects the Iowa Supreme Court’s decision and views it as a positive step toward clarifying the legal framework surrounding crypto transactions and affirming the importance of working with compliant, transparent operators like Bitcoin Depot,” the spokesperson said.
The company is separately embroiled in a larger legal battle in Iowa, after Attorney General Brenna Bird sued the company and fellow ATM provider CoinFlip in February.
According to the allegations, Iowans have lost around $20.4 million as a result of sending funds via Bitcoin Depot and CoinFlip.
The Attorney General’s office says that scams account for 98.16% of the money Iowans have sent via Bitcoin Depot since October 2023, when it began an investigation into cryptocurrency ATM firms (the corresponding percentage for CoinFlip is 94.92%).
Bird also alleges that Bitcoin Depot and CoinFlip take cuts of 23% and 21% of all cryptocurrency transactions sent via their respective ATMs, and that Bitcoin Depot is misleading about the terms of its refund policy.
“We already know that [fraudsters] target older Iowans, but now it seems that they even hunt through obituaries to target widows […] And the crypto ATM companies take a cut of the profits,” said Bird.
Decrypt has contacted CoinFlip for comment.
Bitcoin Depot told Decrypt that it has already implemented several layers of protection, including ID verification, transaction monitoring, live support and automated scam warnings.
“Our dedicated law enforcement liaison team, staffed by former law enforcement, works closely with agencies across the country,” said the spokesperson. “We regularly assist investigators using our blockchain analytics to trace transactions, recover stolen funds, and help solve active cases, and we’ll continue supporting and assisting law enforcement wherever possible.”
Edited by James Rubin, and his team will be discussing internally around that as well. So you’re very excited to like, stay abreast of how things progress as they build out the product suite itself. I think they’ve chosen a pretty difficult area to build towards, in the sense of like, out like automating and creating access to like algorithmic trading strategies is hard.
