tl;dr
The Iowa Supreme Court ruled that money paid into Bitcoin Depot ATMs during two separate scams must be returned to Bitcoin Depot, not the victims, overturning a lower court decision. The victims were coerced into transferring $14,000 worth of Bitcoin via the ATMs in 2023 and 2024. The court found th...
The Iowa Supreme Court has ruled that funds paid into Bitcoin Depot ATMs during two separate scams must be returned to Bitcoin Depot, reversing a lower court's decision that favored the victims. These scams, occurring in July 2023 and February 2024, involved victims being coerced into transferring about $14,000 in Bitcoin via Bitcoin Depot ATMs. Although police seized $28,000 in cash linked to these cases, the transferred Bitcoin could not be recovered.
The court concluded that the victims entered contracts with Bitcoin Depot, which included warnings about potential scams and required users to certify ownership of their Bitcoin wallets. Claims that the contracts were invalid due to duress were rejected, as Bitcoin Depot had no prior knowledge of the fraudulent circumstances surrounding the transactions. Justice Dana Oxley emphasized that the company's precautions did not imply liability for fraudulent transfers.
This ruling directs the return of the seized $28,000 to Bitcoin Depot, not the victims, underscoring the complex nature of liability in cryptocurrency transactions and the contractual obligations users accept when using crypto ATMs. Bitcoin Depot views the decision as a validation of due process and an affirmation of their proactive stance on fraud prevention.
Separately, Bitcoin Depot faces a lawsuit from Iowa Attorney General Brenna Bird alleging widespread scams facilitated through Bitcoin Depot and fellow ATM provider CoinFlip, which reportedly resulted in $20.4 million in losses. The Attorney General’s investigation found that scams accounted for over 98% of Bitcoin Depot's transaction volume since October 2023, with allegations that the companies profit by taking hefty transaction fees—23% for Bitcoin Depot and 21% for CoinFlip—and misleading refund policies.
The Attorney General also asserts that vulnerable populations, including older Iowans and widows, were specifically targeted by scammers using these ATMs. Bird criticized the companies for capitalizing on these scams, stating they "hunt through obituaries to target widows" and profit from the fallout.
Bitcoin Depot counters these allegations by highlighting multiple anti-fraud measures they have implemented, such as ID verification, transaction monitoring, live support, and automated scam warnings. The company also emphasizes its collaboration with law enforcement through a dedicated liaison team staffed by former officers, using blockchain analytics to trace transactions, recover funds, and assist active investigations.
The Iowa Supreme Court’s decision highlights the growing legal complexities of cryptocurrency operations, reinforcing the importance of clear contractual terms and responsibilities in crypto transactions while raising broader questions about protecting consumers from fraud in this rapidly evolving space.