Recovering Funds Transferred Via Bitcoin ATMs Is 'Virtually Untraceable', Say Iowa Authorities

A woman from the city of Clive, Polk County, Iowa, fell victim to a scam involving the use of a Bitcoin ATM, according to a press release by local police that was shared on the department’s Facebook.

The victim was baited into sending her exploiters $6,600 through a Bitcoin ATM after she received a phone call from somebody impersonating the Polk County Sheriff’s deputy.

She was told that failure to do so would lead to her arrest.

The Clive Police Department is now collaborating with the Polk County Sheriff’s Office to bring the scammer to justice. They emphasize that members of law enforcement agencies would never contact individuals requesting payment through Bitcoin ATMs.

The Clive Police also said that funds transferred through Bitcoin ATMs are “virtually untraceable, making it incredibly challenging to recover the money.”

Clive authorities did not immediately respond to Decrypt's request for comment.

Bitcoin ATMs: popular among scammers

According Chainalysis’s 2023 report on crypto crime, 1% of victim payments to scams come from crypto ATMs.

Though that figure appears small, the blockchain analytics and security company says ATMs “aren’t generally used to send funds to many other illicit address types.”

Only 2.2% of funds sent from ATMs last year went to illicit addresses, accounting for $67.5 million of the eye-popping $20.6 billion in illicit transaction volume last year.

However, scams make up the bulk of this volume. That year, $35.3 million went to scammers from Bitcoin ATMs, meaning that scams account for over half of all the illicit transacting through Bitcoin ATMs.

Chainalysis chalks ATMs’ popularity among scammers down to their ease of use.

“An ATM similar to the ones they use for fiat may offer what appears to be the easiest way to initiate a cryptocurrency transaction, as users can simply insert cash, type in a cryptocurrency address, and complete their transfer.”

At the end of last year, the FBI also warned the public about the growing popularity of cryptocurrency ATMs among scammers.

According to a warning by Connecticut police, there are many types of Bitcoin ATM scams, from “romance scams” where confidence tricksters establish a rapport on dating apps before soliciting funds, to computer “anti-virus” scams that start from bogus pop-up ads to straight-up fraud, as seen in Clive.

The common thread running through all of them is that “criminals create a false sense of urgency and trick victims into withdrawing cash from their bank account. The scammer then directs the consumer to deposit the cash into a virtual currency kiosk.”

Crypto ATMs take center stage

In March, the UK’s Financial Conduct Authority ordered crypto ATM operators throughout the country to shut down or face “further action.”

The FCA added that to date, none of the crypto firms registered with it have been approved to offer cryptocurrency ATMs, which ultimately means all crypto ATM operators in the UK are currently unapproved and thus, illegal.

Kraken Reveals Vulnerabilities in ‘Commonly Used’ Bitcoin ATMs

Crypto ATM tracker CoinATMRadar lists ten crypto ATMs operating in the UK, six of which are in the Greater London area.

This is down from the eighty-one British crypto ATMs that were operational at the time of the notice, fifty of which were in London.