A report by TRM Labs has revealed that crypto ATMs have become a haven for crypto fraud and illicit transactions. From 2019 till date, these devices have been used to transact $160 million worth of cryptocurrencies.
Crypto ATMs are automated teller machines that enable users to buy and sell cryptocurrencies, primarily Bitcoin, using cash or debit cards. Unlike traditional ATMs that connect to bank accounts, crypto ATMs directly interact with a user’s digital wallet to facilitate transactions.
The process typically begins when a user scans a QR code from their digital wallet at the machine. They can then deposit cash or use a debit card to purchase cryptocurrency, which is sent directly to their wallet.
Crypto ATMs operate on a blockchain system, a decentralized digital ledger that ensures transparency and security for transactions. While the process is generally quick, transaction confirmations may take some time depending on network conditions.
These machines are available in various locations worldwide, with a significant concentration in the United States. Users can locate crypto ATMs using services like CoinATMRadar.
According to TRM Labs, crypto ATMs globally can be prone to fraud and money laundering. Law enforcement and regulators have expressed concerns that these machines may be used for scams.
“The cash-to-crypto industry—which is dominated by crypto ATMs—has processed at least USD 160 million in illicit volumes since 2019,” it said. “Last year, illicit volumes in the cash-to-crypto industry stood at 1.2% of total volume, double the 0.63% for the overall crypto ecosystem.”
Additionally, the Internet Crime Complaint Center (IC3) reported in 2023 December over 15,000 complaints about digital asset scams involving people aged 60 and older last year, with losses exceeding USD 1 billion. 2,000 of these complaints involved Bitcoin ATMs.
Impersonators targeting the elderly often disguise themselves as loved ones in distress, seeking help. Due to their lack of familiarity with technological advancements like cryptocurrency, many seniors fall victim to these scams.
Scammers deceive individuals into withdrawing large sums of money and depositing it into cryptocurrency machines at locations they specify. Once the money is converted into cryptocurrency, the scammers transfer it to their own accounts.
Crypto ATMs across the world
TRM Labs revealed that a study analyzing transaction data from over 300 crypto ATM companies across 56 countries identified a pattern to help authorities detect suspicious activity. The study found that payments from different ATM companies, often located in different countries, are being sent to the same address.
This raises concerns because most ATM companies require senders to own the wallet addresses receiving the funds. These rules are intended to ensure the machines are used for personal finance and not by unknown third parties.
A recent report shows revenues from scams are in a decline while the number of phishing and romance scams are on the increase.
“Unlike web browsers, transaction location data cannot be spoofed by using a VPN,” TRM Labs stated. Therefore, if multiple deposits from various ATMs in different locations are quickly sent to the same address, it indicates potential rule violations.
In Germany, authorities seized 13 Bitcoin ATMs that lacked proper licenses, along with €250,000 in cash. In the UK, 26 illegal Bitcoin ATMs were shut down in 2023, reducing the number of machines by 90%. In Ohio, over 50 Bitcoin ATMs were confiscated due to money laundering investigations.
Despite still having the most Bitcoin ATMs, the US saw over 1,000 machines taken offline due to regulations since May 2024, according to TRM Labs. Additionally, Ian Freeman, who operated a Bitcoin ATM network, was sentenced to eight years in prison for crimes including money laundering.
TRM Labs, based in San Francisco, specializes in detecting and investigating cryptocurrency-related fraud and financial crimes. They provide a platform that assists banks, cryptocurrency businesses, and government agencies with tools for preventing money laundering, monitoring transactions, checking wallets, and tracking transactions.
Recently, TRM Labs introduced Behavioral Intelligence, a new feature that simplifies the analysis of transactions and identifies patterns in blockchain investigations. This builds on their previous tool, Signatures®, launched in 2020, which helps detect suspicious transaction patterns that might otherwise be overlooked.
TRM Labs aims to support its users—such as law enforcement and banks—in combating complex financial crimes, adhering to regulations, and enhancing their investigative capabilities.
