Iowa Supreme Court Ruling on Cryptocurrency Scams
In a significant legal decision, the Iowa Supreme Court has determined that funds arising from scams reported by two victims must be returned to Bitcoin Depot rather than the duped individuals themselves. This verdict overturned a previous ruling by a district court.
Details of the Scams
The scams occurred in February 2024 and July 2023, during which victims were manipulated into using a Bitcoin Depot ATM situated in Linn County to transfer Bitcoin valued at $14,000. Following these events, law enforcement confiscated the cash involved in the transactions as part of their investigative efforts; however, they could not recover the actual Bitcoin sent by the victims.
Initially, a district court directed that the identified cash, amounting to $28,000, be reimbursed to the victims. Bitcoin Depot contested this ruling and escalated the matter to the Iowa Supreme Court, which ultimately sided with the company.
Contractual Obligations and Rulings
Justice Dana Oxley, in her ruling, noted that the victims had engaged in a contract with the ATM operator and had been warned about possible fraudulent activities prior to conducting the transfers. They certified that they owned the wallets linked to the Bitcoin transactions—an essential condition for completing a transfer with Bitcoin Depot ATMs.
“The fact that Bitcoin Depot took steps to inform customers of risks in its operations does not imply liability for fraudulent transactions that occur.” – Judge Dana Oxley
One of the victims, Carrie Carlson, contended that her contractual agreement with Bitcoin Depot should be nullified on the grounds of duress. Nonetheless, the court found that Bitcoin Depot had no viable means to ascertain if Carlson or the other victim was coerced, dismissing her claim that the warnings issued by Bitcoin Depot implied prior knowledge of potential scams.
Bitcoin Depot’s Response and Further Legal Challenges
Consequently, the Supreme Court called for the return of the seized funds to Bitcoin Depot, leaving the victims without compensation for their losses. A spokesperson from Bitcoin Depot expressed appreciation for the court’s decision, interpreting it as a reinforcement of due process in clarifying the legal parameters surrounding cryptocurrency transactions and emphasizing the necessity for operating under compliant conditions.
Bitcoin Depot faces further scrutiny and legal challenges within Iowa, as Attorney General Brenna Bird has launched a lawsuit against the company and another ATM service provider, CoinFlip, based on allegations that Iowans collectively lost approximately $20.4 million due to scams through these ATMs. According to the Attorney General’s findings, scams have represented an overwhelming 98.16% of the funds sent via Bitcoin Depot since an investigation commenced in October 2023, with CoinFlip not far behind at 94.92%.
Bird’s lawsuit posits that both operators retain substantial commissions—23% for Bitcoin Depot and 21% for CoinFlip—from all transactions processed through their ATMs while allegedly providing misleading information about their refund practices.
“Predatory scammers are targeting vulnerable populations like older individuals, even resorting to searching obituaries to find bereaved widows to exploit.” – Attorney General Brenna Bird
Decrypt has reached out to CoinFlip for their response to these accusations.
In response to the ongoing criticism, Bitcoin Depot emphasized its commitment to enhancing customer safety through various measures, including identity verification processes, transaction oversight, and real-time customer support. The firm stated that it has a dedicated team of former law enforcement officials who collaborate with agencies nationwide to trace fraudulent transactions and aid in solving cases, all while maintaining its support for law enforcement efforts.
