Bitcoin ATMs are Proliferating. They are legal, but can be tools of cyber crooks

Walk into a smoke shop or small convenience store in South Florida—anywhere from Homestead to Boynton Beach—and you might find not one, but two ATMs.

Look carefully before trying to get money because there is a big difference.

One dispenses paper bills, dollars to spend. The other spits out a paper receipt for Bitcoin, by far the most popular cryptocurrency. Nothing wrong with that if you are comfortable converting your honestly earned dollars to crypto.

But South Florida cybercrime detectives also say crooks are using the growing number of Bitcoin machines for nefarious purposes. They say the machines, while perfectly legal, are also largely unregulated and are often used to “launder” dirty money – cash that has come from drug dealing, robbery or other illegal activities.

When it’s easy to invest in cryptocurrency online, Miami-Dade Cyber ​​Crimes Task Force Cmdr. George Perera questions the need for Bitcoin ATMs, which don’t leave much of a financial footprint.

“Why do they have unless it’s for criminal activity?” he asked.

Finding a machine is as easy as turning on a computer or a mobile phone. The website bitcoindepot.com — which helps you find a Bitcoin ATM by simply putting in a zip code or city — shows there are 1,691 machines in Florida and 384 between Boynton Beach and Homestead.

The machines, which have gained popularity in recent years alongside cryptocurrencies, are believed to have more than 50,000 across the country. There is a reason why they are attractive to the small businesses where they are most common – they are profitable on several levels.

The largest manufacturers of the machines are the companies Genesis Coin and General Bytes. They sell the machines for as much as $5,000. They are basically Internet-connected kiosks that send cryptocurrency to a digital wallet after actual money is deposited. Machine operators pocket fees, which at Bitcoin ATMs represent a percentage of the transaction.

Shop operators, meanwhile, collect rent from the machine operator or owner for a three-by-three-foot space.

Speaking about the industry in 2021, Digitalmint’s director of compliance Seth Sattler acknowledged that there were some “bad actors” giving the machine industry a bad name by continuing to allow anonymous transactions. Digitalmint is one of the leading providers of Bitcoin machines and technology in the country.

“While a small number of Bitcoin ATM operators go above and beyond…others in the cash-to-crypto industry simply turn a blind eye and are complacent to these bad actors by simply using the minimum customer protections, which in many cases allow completely anonymous transactions,” Sattler told the news site.

The Bitcoin ATM machine looks almost exactly like its counterpart, with a computer screen, a keyboard and a slot to insert money – as if you were making a deposit at a regular ATM. And the way criminals launder money with it is as ingenious as it is simple.

Here’s a scenario: A small drug dealer makes a few thousand dollars on a sale. The dealer then hires a child for a few dollars to enter a cryptocurrency address and deposit the money into the machine. In exchange, the machine spits out a Bitcoin receipt worth the same or equivalent amount.

Miami-Dade’s cyber police say one problem is that the machines are very easily regulated. Most have a video recording device and some ask to scan a driver’s license. However, scams can easily bypass it, said Miami-Dade cybercrimes Sgt. Bridget Doyle.

In the case of the example mentioned above, the kid hired by the launderer would be filmed. And he or she could easily have used false identification. When it comes to checking a crypto address, it changes with every action and is difficult to track, investigators say.

Doyle said most companies notify a store owner if more than $6,000 is deposited. She said there are about a dozen companies she is aware of that are now selling cryptocurrency machines.

“When criminals move into crypto, the first thing they do is find a new ID,” she said.

2022 Miami Herald. Distributed by Tribune Content Agency, LLC.