Concerns Over Law Enforcement Actions Against Bitcoin ATMs
Law enforcement agencies in the United States have increasingly come under fire for aggressively dismantling Bitcoin ATMs to secure cash, with experts warning that such actions may exceed legal boundaries and lead to violations of rights. Chris Ryan, Chief Legal Officer at Bitcoin Depot, voiced his concerns in an interview with Decrypt, asserting that the cash seized by police legitimately belongs to his company, based in Atlanta, Georgia.
Furthermore, he indicated that law enforcement is liable for any damages inflicted on the machines during these seizures, even as efforts are made to reimburse affected consumers who claim to have fallen prey to scams.
Misguided Practices and Financial Implications
Ryan voiced alarm at the practices of some officers, suggesting that their misguided attempts to protect consumers only serve to create new victims by damaging property and confiscating funds.
In a notable incident last week, Texas law enforcement authorities reportedly utilized power tools to extract $32,000 from a Bitcoin Depot kiosk. Due to the manner of extraction—which involved cutting into the machine—Bitcoin Depot’s COO, Scott Buchanan, revealed that a total replacement of the kiosk is essential, citing costs of approximately $14,000 under their profit-sharing model. He elaborated,
“In many instances, when officers forcibly break into the machines, they effectively ruin them.”
While Buchanan noted that Bitcoin Depot is always willing to cooperate with law enforcement in unlocking the machines for fund recovery, he highlighted a significant issue: municipalities often lack the financial capability to provide restoration for damaged property. Ryan added that it is rare for the company to receive compensation for loss.
Scams and Legal Confusion
Scams involving Bitcoin ATMs are increasingly prevalent, with fraudsters frequently using the irreversible nature of cryptocurrency transactions to con victims, often impersonating government entities or banking institutions. A report by the FBI revealed that Americans lost at least $247 million through crypto kiosks in 2024—a staggering 31% increase from the previous year—with scammers often operating by providing fraudulent wallet addresses to their victims.
Ryan sympathized with the individuals who fall victim to these scams while asserting that Bitcoin Depot retains the rights to the cash involved in transactions, clarifying that law enforcement’s understanding of the business model and the nature of the crimes can sometimes be flawed.
Once a customer uses a Bitcoin ATM by inserting cash and directing Bitcoin into a specified wallet address, Ryan explained, Bitcoin Depot’s role in the transaction concludes.
Confusion often arises in legal contexts when authorities characterize seized cash as proceeds from crime rather than recognizing it as funds collected through scams, a point Ryan emphasized. He reported that seizures from Bitcoin Depot ATMs could occur up to 20 times in a year, frequently without any extensive force being employed.
Legal Framework and Company Response
Unfortunately, there is a concerning subset of law enforcement that chooses to bypass standard warrant processes, with some officers giving Bitcoin Depot notice of impending break-ins. Each state varies in legal frameworks, but two Iowa Supreme Court cases in 2023 found in favor of Bitcoin Depot, subsequently affirming the company’s right to the funds being seized. The Iowa rulings clarified that users must certify ownership of the digital wallets receiving Bitcoin.
Bitcoin Depot claims to have successfully countered similar unlawful actions in various states including North Carolina, Virginia, and Louisiana, with some lawsuits reaching settlements prior to trial.
As fraud related to crypto ATMs continues to escalate, the Internet Crimes Complaint Center (IC3) of the FBI notified the public in 2021 about the increasing prevalence of such crimes and issued warnings regarding the rapid settlement nature of cryptocurrency transactions, which can lead to irreparable financial losses for victims. Pennsylvania’s Attorney General warned this February that recovering funds lost to ATM-based scams is largely impossible.
In response, Bitcoin Depot has engaged local law enforcement to track victims’ cryptocurrency through collaboration with the analytics firm Elliptic and established a team with background in law enforcement to assist and educate on the nature of their business, aiming to guide victims in filing complaints with the IC3. Ryan concluded by noting that while incidents of destructive break-ins are fortunately not the majority, they underscore a broader lack of understanding regarding cryptocurrency operations among some officers.
