Bitcoin of America to Pay $86,000 in Settlement with Connecticut Department of Banking

Bitcoin of America, an Over the Counter (OTC) cryptocurrency exchange and a national operator of Bitcoin Kiosks, has been ordered to refund $86,000 to consumers in Connecticut, according to a recent announcement by the state’s Banking Commissioner, Jorge Perez.

The firm, known for its presence around the country with Bitcoin ATMs or BTMs, had been operating these kiosks without obtaining the necessary money transmitter license in Connecticut. These kiosks allowed consumers to purchase virtual currency using cash. However, four consumers in the state suffered substantial losses due to scams perpetrated through these unlicensed kiosks. This led to a settlement, and the firm is now winding down its operations in the state following a criminal indictment.

Commissioner Perez stated, “This case underlines the importance of vigilance when using virtual currency kiosks.” He emphasized the department’s commitment to ensuring that kiosk owners and operators comply with state licensing laws and regulations.

The victims were tricked into depositing cash into the kiosks using a QR code provided by the scammers, believing they were safeguarding their money. In reality, they were unknowingly purchasing virtual currency, which was then transferred to the scammers’ digital wallets, resulting in a loss of their funds.

In an effort to address this growing issue, the Department of Banking and the Connecticut State Police have introduced a bill, HB 6752 An Act Concerning Digital Assets. The bill seeks to mandate virtual currency kiosks be licensed as money transmitters, giving the Commissioner jurisdiction over these machines and their operators. It also aims to provide additional protections, including clear on-screen consumer disclosures and extra safeguards for first-time kiosk users.

Expressing his gratitude towards the Connecticut State Police for their assistance in the case, Commissioner Perez also shared that the Department of Banking, along with the Connecticut State Police, the Office of the Attorney General, and the Department of Consumer Protection, has issued an alert with tips to help consumers avoid falling prey to such scams in the future.


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Bitcoin of America indicted for operating unlicensed kiosks

Bitcoin of America, a Bitcoin technology firm, and three of its executives are facing charges of money laundering, conspiracy, and other crimes connected to the operation of more than 50 unlicensed crypto kiosks in Ohio that knowingly benefited from victims of cryptocurrency scams. The firm, which operated as S&P Solutions, allegedly pocketed a 20% transfer fee each time a scam occurred and continued to do so even after learning they were fraudulent.

According to the prosecuting attorney Andrew Rogalski, romance scammers, law enforcement impersonators, and “robocallers” exploited the lack of Anti-Money Laundering protections in the firm’s systems to transfer funds out of users’ crypto wallets. These scammers directed the victims, who are often elderly or otherwise vulnerable, to specifically go to Bitcoin of America ATMs, take money that they’ve withdrawn from their savings accounts or 401Ks, and put the cash into the machine in exchange for BTC in a wallet they think is theirs but have no control over.

During a press conference, Rogalski commented that “these ATMs are ready-made for scammers,” adding that they take advantage of victims who are often elderly or otherwise vulnerable. In one instance, an elderly gentleman lost $11,250 in three transactions to one of the dodgy kiosks in under an hour to this scam.

The firm and its executives allegedly operated the kiosks without a money transfer license and were able to do so by making written misrepresentations regarding the nature of their business to government agencies. Authorities seized 52 Bitcoin ATMs last week, but the firm has more in Ohio and other states. Bitcoin of America made $3.5 million in profit from cash deposits at these unlawful kiosks in 2021, Rogalski said.

Officials believe the firm has been operating and evading regulatory safeguards and financial compliance requirements since 2018. The investigation into the firm and its executives was reportedly spearheaded by the United States Secret Service’s Cyber Fraud and Money Laundering Task Force.

This indictment comes after the FBI’s Miami Field Office warned in October that crypto ATMs were becoming a popular vehicle for scammers to defraud victims in an increasing trend of “pig butchering” scams. It highlights the importance of proper regulation and compliance in the cryptocurrency industry to protect vulnerable individuals from fraudulent activities.


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