Bitcoin ATM Scams: Why Smart People Lose Money (And How to Fight Back)

I: The Blame Game

If you lost money through a Bitcoin ATM scam, you have probably replayed that moment in your head a thousand times. You might be thinking,

• “How did I fall for this?”

• “I thought it was suspicious. Why didn’t I trust my gut?”

• “I should have known better?”  

When I investigated scams at the FTC and the CFPB, I would hear people blame themselves over and over. Hundreds of victims of all different types of scams, and almost of them would repeat the same phrase: “I feel so stupid.”

But here is what you need to understand: you weren’t stupid. You were up against professional scammers whose entire job is figuring out how to trick people. These scammers prepared, practiced, and performed their speech hundreds of times to near perfection. They had all the time in the world to prepare for the 40 seconds when your guard was down just enough to believe the trick.

These scammers remind me of my kids. I don’t mean to say that my kids are out there ripping people off and destroying their lives, but both the scammers and kids understand the power of taking advantage of someone who is cognitively overloaded.

II: Nerds and Criminals

We’re in the post-Halloween season in my house. That means the candy is plentiful. The candy of choice: Nerds.

I never hear the end of it, “Dad, can I have some Nerds?” “No, it’s 6 am,” I say. Then later, “What about now?” “No, you’re literally on the toilet.”

Meanwhile, I’m doing what every adult does—juggling a thousand things. I’m trying to fix the weed wacker, respond to emails, and stop my dog from eating some random toy left on the floor.

All these things are bouncing around my mind along with other things: ideas about my cases, friends I forgot to text back, what to get for my wife’s birthday. Life is hard.

But what are my kids thinking about? It’s “how do I get Dad to say yes to some Nerds.”

I never stood a chance.

Sometimes they just wear me down. Not because I changed my mind. Not because their arguments got more persuasive. But because they spend 100% of their mental energy on this one problem, while it was taking up maybe 0.5% of mine.

Scammers work exactly the same way.

You’re doing your best. Life is work stress, family obligations, bills to pay, a dishwasher that is making a weird sound.

Meanwhile, in a boiler room somewhere, there is a person in a chair with a script. A script that has been tested, and vetted, and proven. That person is thinking one thing: How do we get this person to send us money?”

Here’s how they do it.

III: What a Scammer’s “Job” Actually Looks Like?

During my time in federal enforcement, I saw behind the curtain of these operations. Sometimes, the operation was made up of scrappy, fly-by-night fraudsters. Other times, it was big, sophisticated operations. But the playbooks were the same.

These scammers rely on scripts. The scripts aren’t generic. The scammers don’t just read the paper front to back nonstop like a wizard casting a spell to get people to open their wallets. These scripts are designed with a sophisticated understanding of human nature and cognitive biases.

And the scripts get better over time. Scammers compare notes in group chats, try different approaches to see what works best, and constantly adapt, using new tricks people haven’t heard of yet.

It’s a full-time job, being a crook.

Often times these scammers use different voice tones and pacing to create urgency. They come up with different reasons why there is pressure for you to act now (and think later). They claim they have authority by saying they are from the fraud department at your bank or even from the federal government. Their goal is to isolate you. Keep you on the phone so you only hear their voice, and not anyone else’s who might question anything the scammers say.

So remember this. While you were at work, picking up your kids, making dinner, or trying to remember if you paid your electric bill, the scammers are workshopping the exact strategies to get you to make a mistake.

DC’s attorney general is suing one of these companies, Athena Bitcoin, Inc., for failing to implement adequate anti-fraud measures.

In announcing the lawsuit, the DC attorney general put it this way:

“Athena knows that its machines are being used primarily by scammers yet chooses to look the other way so that it can continue to pocket sizable hidden transaction fees. Today we’re suing to get District residents their hard-earned money back and put a stop to this illegal, predatory conduct before it harms anyone else.”

The numbers back up the attorney general’s claims. The company’s internal data shows that 93% of all Athena Bitcoin ATM “deposits” were the direct result of scams. And after someone gets scammed through their ATMs, Athena imposes a strict “no refunds” policy.

People lost an average of $8,000 per scam transaction. One victim lost nearly $100,000. The median age of the victims was 71.

V: The Other Cars On The Scam Train

A lot of people say that Bitcoin ATM scams are “obvious” in hindsight. But this is just one example of the scams targeted at people every single day. There’s also:

• Romance scams: Where a scammer spends months building a relationship with their victims. There are daily conversations, intimate details shared, photos exchanged. Then, the ’emergency’ hits.
• Impersonation scams: Scammers spoof the caller ID showing your bank’s real number. They use scripts that include your actual account details (from data breaches) and knowledge of your recent transactions
• Government impostor scams: Scammers show badges, use real names of government officials, and detail actual cases that you could look up if you can get off the phone.
• Tech support scams: Scammers pretend to be someone else to get remote access to your computer. They show you (fabricated) evidence of problems and official-looking screens.

We aren’t talking Nigerian price emails anymore, folks. These are sophisticated operations and manipulative tactics that would impress a marketing agency.

These scams all have a few things in common, however. They engineer the situation to: (1) Get you emotionally activated so you aren’t thinking, you’re feeling; (2) Isolate you from people who might question what the scammer is saying; (3) Make you feel pressured, so you move first, think later; (4) And often times, leave you feeling embarrassed to avoid asking for help and telling other people about the scam.

VI: How to Fight Back

Before the scam:

• Think about how to protect yourself and your family.
  • Tell your family about new scams you have heard about.
  • Share materials from trusted resources on how to spot and prevent a scam.
  • Set up a “code word” so if you someone calls pretending to be you (using voice cloning), your family member can ask for the code word to see if it’s really you.
• Remember, if you are ever in doubt that a call is legitimate, hang up, take a beat (and a breath), and then come back with a calm mind.

After the scam:

• Protect yourself
  • Document everything
    • Save all communications (texts, emails, call logs)Get transaction receipts from the Bitcoin ATMWrite down the timeline while you remember itNote the ATM location and company name on the ATM
    Change your passwordsFreeze your credit
  • Keep a close eye on your bank accounts. And if you see fraud, report it to your bank immediately.
• Protect others
  • Spread the word
    • Report it to the Federal Trade Commission (reportfraud.ftc.gov), the FBI (ic3.gov), your State Attorney General, and the local police (get a police report)
    • Tell any business that was involved, like the company that runs the Bitcoin ATM, the convenience store, or the bank where the money came out of.
• Consider legal options
  • You may have legal claims. There could be claims against the ATM operator or others. You may even have an opportunity to join a class action.  

If you want to talk through your situation with us, request a consultation (no obligation)

If you were tricked and are now curious about whether you have any legal options to address the fraud and deal with the fallout of a scam? Reach out for a free consultation

Disclaimer

Informational only. Attorney advertising. Not legal advice.

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About the Author

Angel E. Reyes is a former federal enforcement attorney at the Consumer Financial Protection Bureau and the Federal Trade Commission. After bringing enforcement actions against the largest U.S. companies, which resulted in over $100 million returned to consumers, he left the government to open Power to the People Law PLLC. This law firm focuses on protecting people’s homes and bank accounts.