Bitcoin ATM firm allegedly profited from crypto scams via unlicensed kiosks: Prosecutor

ATM

More than 50 crypto kiosks were seized in the investigation led by the U.S. Secret Service’s Cyber Fraud and Money Laundering Task Force.

A Bitcoin (BTC) technology firm and its executives have been indicted for allegedly operating unlicensed crypto kiosks in Ohio thatknowingly benefited from victims of cryptocurrency scams.

S&P Solutions, which operated as Bitcoin of America, along with three of its executives, are facing charges of money laundering, conspiracy and other crimes connected to the operation of more than 50 unlicensed crypto kiosks in the state.

A Cuyahoga County grand jury returned the indictment on March 1 against the firm, the owner and founder, Sonny Meraban, manager Reza Meraban, and company attorney William Suriano. The trio was arrested last week and search warrants were executed on their residences in Florida and Illinois.

3 men, 1 business charged in cryptocurrency scam; avoid Bitcoin of America ATMs, Cuyahoga Co. prosecutor says https://t.co/LaR1L2E1yH
— News 5 Cleveland (@WEWS) March 2, 2023

According to the prosecuting attorney Andrew Rogalski, romance scammers, law enforcement impersonators, and “robocallers” exploited the lack of Anti-Money Laundering protections in the firm’s systems to transfer funds out of users’ crypto wallets.

Rogalski commented during a press conference that “these ATMs are ready-made for scammers,” adding that they:

“Direct the victims, which are often elderly or otherwise vulnerable, to specifically go to Bitcoin of American ATMs, take money that they’ve withdrawn from their savings accounts or 401Ks.”

They are then instructed to put the cash into the machine in exchange for BTC in a wallet they think is theirs but have no control over, he explained.

He added that in one instance, an elderly gentleman lost $11,250 in three transactions to one of the dodgy kiosks in under an hour to this scam.

*Product image of a Bitcoin of America kiosk. Source: Bitcoin of America*

Meanwhile, the company allegedly pocketed a 20% transfer fee each time this occurred and continued to do even after learning they were fraudulent.

The indictment also accuses the company of being able to operate due to “written misrepresentations regarding the nature of their business to government agencies,” helping it run the kiosks without a money transfer license, according to a March 3 report from Law360.

Authorities seized 52 Bitcoin ATMs last week, but the firm has more in Ohio and other states. Bitcoin of America made $3.5 million in profit from cash deposits at these unlawful kiosks in 2021, Rogalski said.

Officials believe the firm has been operating and evading regulatory safeguards and financial compliance requirements since 2018.

The investigation into the firm and its executives was reportedly spearheaded by the United States Secret Service's Cyber Fraud and Money Laundering Task Force.

In October, the FBI’s Miami Field Office warned that crypto ATMs were becoming a popular vehicle for scammers to defraud victims in an increasing trend of “pig butchering” scams.

9 years after the first Bitcoin ATM, there are now 38,804 globally

ATM

From one Candian coffee shop to a worldwide network of nearly 39,000, crypto ATMs have turned nine years old and are only expected to continue growing.

On Oct. 29, 2013, a coffee shop in downtown Vancouver, Canada opened what is understood to be the world’s first publicly available Bitcoin (BTC) automatic teller machine (ATM) operated by Robocoin.

The crypto ATM saw 348 transactions and $100,000 transacted in its first week of operation.

As of Oct. 30, 2022 — nine years and one day on — Robocoin has ceased operations and the first crypto ATM has likely been removed or replaced, but crypto ATMs have continued to increase in number with 38,804 cryptocurrency ATMs in existence today, according to Coin ATM Radar.

The global hub for crypto ATMs has since moved however, with the United States now housing nearly 88% of the world’s supply of crypto ATMs and taking credit for 90% of all newly installed ATMs over the past few months.

In October alone, 129 of the world’s newly installed ATMs were located in the United States out of a total of 205.

Canada, home to the first crypto ATM, has only seen that number creep to 566 after nine years, though it’s still placing in second at 6.6% of the total, as per Coin ATM Radar data.

Meanwhile, Spain became the third-largest crypto ATM hub on Oct. 22 with its 0.6% share across 215 ATMs.

A July report from Research and Markets estimates the crypto ATM space is now valued at $46.4 million, which will grow more than 10 times to $472 million by 2027, driven by remittances and increased crypto ATM installations.

However, like many crypto-related products, crypto ATM installations have been challenged this year as a result of the crypto bear market.

Crypto ATM installations slowed between January and May before a slight recovery between June and August, but September saw net crypto ATMs drop globally for the first time ever after 459 machines were removed from the global network.

Bitcoin is still the most popular cryptocurrency transacted across crypto-enabled ATMs with nearly 100% supporting BTC transactions per Coin ATM Radar. However, other cryptos also appear to be supported across the network.

Litecoin (LTC) is popular with almost 81% of ATMs supporting the crypto, and Ether (ETH) closely follows at almost 74%, Dogecoin (DOGE) sits in fourth place with just under 40% supporting the so-called memecoin.

In early October U.S. authorities warned crypto ATMs were emerging as a popular method for scammers to receive value and defraud victims most often in “pig butchering” scams where the attacker poses as a potential romantic partner, gaining trust and asking the victim to send them money, or in some cases, cryptocurrency.

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