A clerk at the Amoco gas station in downtown Stillwater called police in October to report that a 75-year-old woman was feeding $20 bills — one after the other — into a cryptocurrency ATM.
By the time police arrived, the woman had deposited $5,820 into the machine and was planning on depositing another $14,180 she had in cash, said Det. Dave Wulfing of the Stillwater Police Department.
“Someone called her and told her she had a $20,000 ‘overpayment’ to her PayPal account,” Wulfing said. “They told her to drive to her bank (Royal Credit Union in Oak Park Heights) and withdraw $20,000.”
Since Jan. 1, 2023, Stillwater police have taken 31 crypto-related scam reports from residents totaling almost $213,000, with at least half of that amount having been deposited into cryptocurrency ATMs located in the city, he said. One resident, a 70-year-woman, lost $29,000 in August, he said.
Earlier this month, the Stillwater City Council discussed moving forward with a plan to ban crypto ATMs within city limits. There are at least four such machines currently in operation in Stillwater, and city officials say it is difficult to determine who owns or operates them.
Mayor Ted Kozlowski said the machines have become essential tools for fraudsters and give international criminals a local pipeline into victims’ bank accounts. “It makes it far too easy to prey on people, and it’s impossible to trace if we need to recover funds,” Kozlowski said.
Warnings not working
Cryptocurrency ATMs accept cash from the customer and then either credit it to the account of another person; move it from one account to another account for the same person, or relinquish control of the currency to another person, said City Attorney Korine Land.
“They’re not the same as an electronic funds transfer from bank to bank or a cash dispensing ATM,” she said. “These ATMs only accept cash and then perform one of those transfers with it.”
State law requires that any person engaged in cryptocurrency as a business is required to have a state license from the Commissioner of Commerce, disclose certain details to the customer before the transaction can begin and maintain records of all transactions for five years, but Land said few of the businesses actually obtain a state license.
Each machine must post a warning asking users if they have been sent to make a payment before a transaction can commence.
“WARNING: LOSSES DUE TO FRAUDULENT OR ACCIDENTAL TRANSACTIONS ARE NOT RECOVERABLE AND TRANSACTIONS IN VIRTUAL CURRENCY ARE IRREVERSIBLE,” the warning reads. “VIRTUAL CURRENCY TRANSACTIONS MAY BE USED BY SCAMMERS IMPERSONATING LOVED ONES, THREATENING JAIL TIME, AND INSISTING YOU WITHDRAW MONEY FROM YOUR BANK ACCOUNT TO PURCHASE VIRTUAL CURRENCY.”
But the warnings don’t seem to be working.
“The cash amounts deposited in these transactions are astounding, and the funds are nearly impossible to recover and attempts at doing so require significant local, state and federal resources,” Land wrote in a memo to the Stillwater City Council. “The transactions are nearly impossible to trace.”
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Regulate or ban
State law only licenses the cryptocurrency business, not the ATM location.
Officials in Forest Lake and Woodbury are considering ordinances that would require the registration of the business that hosts the ATMs. Users would have to interact with a store clerk before starting a transaction, employees would be obligated to report suspicious activity and warning signs would be required, among other things, Land’s memo stated.
Wulfing said he is glad that Stillwater, population 19,000, is moving to ban the ATMs. The city’s police department has limited resources, and the scammers are “getting more and more sophisticated and harder and harder to track down,” Wulfing said. “We don’t have the budget to fly investigators out to foreign countries.”
Police Chief Brian Mueller said he sees no value in having cryptocurrency ATMs in the city.
“We’re looking at $11,000 a month in fraud just over the past 12 months,” he said. “We just don’t see any good being done.”
People who legitimately deal in cryptocurrency generally don’t use ATMs because there are significant fees associated with those transactions, Mueller said.
Det. Austin Peterson of the Stillwater Police Department has been researching ordinance language. Land is expected to introduce an ordinance that would ban cryptocurrency ATMs in the city at the April 1 council meeting. The proposed ordinance requires two readings and then must be published before it would be effective; the earliest that could happen is the end of April, Land said.
One win
Anyone asked to make a deposit into a cryptocurrency ATM should call 911 and speak with local law enforcement before taking any action, Kozlowski said. “These criminals are getting very adept at using artificial intelligence to fool people into thinking a family member is in trouble or someone has compromising info about you personally.”
Wulfing said the department received good news this week regarding the October case involving the 75-year-old woman. Police were able to recover $4,339 of the $5,820 that she deposited, he said.
Det. Ryan Mitchell determined that the suspect lived in West Bengal, India, and served a legal process on the Binance cryptocurrency exchange, Wulfing said.
“The exchange is the location that exchanges the crypto from the victim to the suspect’s digital ‘wallet,’” he said. “The $4,339 was still in the wallet that the exchange sent it to, so we were able to have them freeze the wallet with a Law Enforcement Request letter.”
