Cease-and-Desist Order Against Coinme
Washington’s financial regulators have taken a drastic step against Coinme, a Bitcoin ATM operator, by issuing a cease-and-desist order requiring the company to stop operations and refund over $8 million in unclaimed customer funds. The Washington State Department of Financial Institutions (DFI) unveiled this order last Tuesday, claiming that Coinme mismanaged its voucher system for cryptocurrency purchases.
Allegations of Mismanagement
According to the DFI, Coinme’s handling of unredeemed customer vouchers breached the state’s Uniform Money Services Act, as the company allegedly recorded unclaimed vouchers—totaling approximately $8.37 million between January 2023 and the end of 2024—as income rather than customer liabilities.
The investigation revealed that Coinme accrued $2.2 million from Washington customers alone by December 2023 and an additional $6.17 million from both Washington and out-of-state customers by the end of 2024. The Seattle-based company sold cryptocurrencies through paper vouchers that customers could buy at kiosks and later redeem online. However, when vouchers went unredeemed, Coinme reportedly categorized these owed funds as income, failing to inform customers and neglecting to report abandoned property to the state.
Consequences and Timeline
The company faces a tight timeline, with a 20-day window to request a hearing regarding the order; if no action is taken, the temporary restrictions will escalate into permanent ones after the 21-day mark. In addition to halting its services to Washington customers, Coinme must also ensure that all customer funds are returned, segregate the state’s customer assets into separate accounts, and provide restitution based on customer payments or the current crypto value as of the order date.
Financial Penalties and Future Implications
Beyond the immediate operational consequences, the DFI’s filing indicates plans to revoke Coinme’s money transmitter license and imposes both a $300,000 fine and a $375 investigation fee. The charges also implicated Neil Bergquist, the company’s co-founder and CEO, who faces a potential ten-year ban from participating in money transmission activities.
Industry Reactions
Industry observers have suggested that the issues stem from poor operational management rather than outright theft of customer funds. Daniel Liu, CEO of Republic Technologies, commented that if Coinme’s treatment of unredeemed vouchers was akin to retailers’ handling of unused gift cards, the practice may not be inherently unreasonable, but it demonstrates clear mismanagement in execution. Liu emphasized the responsibility of Coinme to address shortcomings in their customer support processes during the product phase-out.
Context of Increased Scrutiny
This incident comes on the heels of heightened scrutiny across the cryptocurrency ATM sector; just last month, California regulators fined another Bitcoin ATM operator, Coinhub, $675,000 for overcharging customers. Coinme itself previously faced a $300,000 fine in June from California’s Department of Financial Protection and Innovation for similar infractions, including excessive markup fees and inaccurate transaction reporting.
