Oh Canada. Bitcoin ATM scams seem especially prevalent in the Great White North. This week Canadian Bitcoin ATM users were targeted with an out-of-order sign, following last year’s “double spending” (crime) spree. In this article, we take a closer at 5 of these and other more sophisticated scams connected with Bitcoin teller kiosks, as well as how you can protect yourself.
Every day, crypto scammers and hackers from around the world devise new schemes to steal your precious cryptocurrencies (i.e. your future retirement fund). This ranges from highly sophisticated ransomware, seemingly pointless crypto “dusting”, cryptojacking to phishing by email and phone.
Yet, oftentimes, the simplest trick is usually the most successful. A trick that seems so elementary and basic that it insults the intelligence of anyone. Just think about why street magicians, hustlers with their three cups and even claw machines still thrive when everyone knows the game’s rigged to take people’s money.
Well, this is what happened in Winnipeg, Canada over the last week. Luckily no victims were claimed (allegedly. Don’t think I’ll come forward if I got fooled by a poster). The latest scam targets Bitcoin ATM machine kiosks, which are sprouting up more and more at busy urban spots worldwide.
What is a Bitcoin ATM Machine?
A Bitcoin Automated Teller Machine (ATM) helps cryptocurrency users convert fiat money into digital assets such as Bitcoin by using a traditional ATM-style machine.
Bitcoin ATMs were a bit of a novelty for cryptocurrency supporters at first, but with improved security and stability, nowadays it is a convenient way for non-technical people to buy digital assets in retail areas, and are usually quite easy to operate. When Bitcoin hit its peak in late 2017, many people believed these machines would become as ubiquitous as regular ATMs in no time, but the bear market ruined that prospect.
Unfortunately, as with traditional ATM machines, which has now become such a focal point for scammers and robbers to steal users’ money through either distraction, deceit or outright robbery, it seems that Bitcoin ATM machines are also in the crosshairs of criminals that either target them or own them.
Usually buyers will complete a few steps on the machine, using a QR code and inserting cash after which the user will be issued a printed receipt with their Bitcoin private data.
A typical transaction might go something like this:
- Select “Buy Bitcoin”
- Pick a cryptocurrency coin (e.g. Bitcoin)
- Click scan QR.
- Scan QR of the wallet
- Insert cash bills.
- Press “Finish”
- Take printed receipt with your private data on it.
Simple enough right? Not so fast.
1. Bitcoin ATM Scam 1: “Out-of-Order” Poster (Canada)
The latest scam happened in Winnipeg, Canada, when criminals tacked up a printed notice to a Bitcoin ATM, claiming that the machine was undergoing maintenance while a new software upgrade was being installed.
As a result, users were advised to deposit the coins they bought not in their own wallets, but rather use a QR code provided on the paper. Of course, if any user sends the crypto to that account associated with the QR code, then bye-bye Bitcoin. You’ve just sent it off to the hackers.
Of Winnipeg’s 20 Bitcoin ATMs, police found posters on two of them, but no victims came forward. This specific scheme is probably the dumbest and most low-tech scam out there. However, people will still fall for it.
Bitcoin ATM Scam 2: “Pay Now Or…” (Canada)
Meanwhile in New Brunswick, a female customer was tricked by a power company imposter, who said that she hadn’t paid her latest electricity bill and had to make immediate reparations at a local Bitcoin ATM. If she didn’t, the power to her restaurant would be “terminated.” The same threat was made to other restaurateurs in the area.
The lady deposited $1,000 CAD, but was then told that the payment had been unsuccessful and she needed to insert $800 CAD more. After she reported the incident, company representatives said they would never ask this kind of payment from any customer.
This scam follows a devastating 2017 period in which people were strong-armed into paying over $340,000 Canadian dollar by fraudsters posing as tax officials or policemen.
Bitcoin ATM Scam 3: ” Double Spending” (Canada)
This is actually the third type of Bitcoin ATM scam in Canada in recent times. What’s up with that ‘eh? Last year in Calgary, police also chased after a group of men who carried ‘double-spend” attacks, where they would withdraw from a Bitcoin ATM and then cancel the order before the ATM operator could process the transaction.
Bitcoin ATM Scam 4: Money Laundering (United States and Spain)
Not all Bitcoin ATM scamming incidents are as relatively small-fry and harmless as they may sound ( or only happen in Canada). Last year a young man, Kunal Kalra, was arrested in Los Angeles on multiple serious charges, including the unlawful operation of a money business services (MSB) and the complicit laundering of drug money through his Bitcoin ATM kiosks, to the value of $25 million.
In his court case, Kalra admitted that he exchanged Bitcoin for cash to help launder money for drug dealers and hardened criminals that collected it over the Darknet. You can only imagine where that money ended up and what was done with it.
Also, in 2018, Bloomberg reported that Spanish police believed that Bitcoin ATMs were being used by drug dealers to pay and receive crypto for purchases over the Darknet, circumventing very serious anti-money-laundering (AML) regulations.
Bitcoin ATM Scam 5: Drug Smuggling (Australia)
Meanwhile in Australia, there was a huge media storm and anti-Bitcoin backlash recently when the charismatic duo behind the Auscoin Bitcoin ATM franchise, Steen McBeth and Sam Karagiozis, finally got exposed as international drug smugglers who used Auscoin as a money-laundering front to explain away their lavish lifestyles, claiming the machines were making up to AUD $500,000 per week. Both now face life sentences.
Are Bitcoin ATMs a good or bad thing?
Bitcoin ATMs provide a valuable real-world interface for casual investors to purchase cryptocurrency at slightly high commission rates, but quickly and effortlessly. As a result, the Global Bitcoin ATM market is forecasted to reach USD 147.9 million by 2025 from USD 7.1 million in 2017.
As they proliferate across the world, users will need to be more vigilant when using them, and apply similar safety measures as with a traditional ATM.
Here are some general guidelines to go by when using a Bitcoin ATM:
- Make sure you’re dealing with a reputable company
- Don’t deposit very large amounts of fiat currency
- Be careful and scan your surroundings
- Inspect the machine for tampering or anything out of the ordinary
- Use common sense where something doesn’t add up
- Call customer support if needed (verify the number against the one on their official website)
- Take action if you feel you’re being duped by contacting law enforcement if needed.
- If anyone tries to force you to make an urgent Bitcoin ATM payment, it’s likely a scam.
Bitcoin ATM scams are low-hanging fruit for less sophisticated criminals who lack the technical skill of hackers to infiltrate users’ devices via malware or hacking. That doesn’t make them any less dangerous though.
By Werner Vermaak
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