California regulators demanded this week that crypto ATM operator CoinFlip pay scam victims $4.8 million in restitution for fraud that took place at the company’s machines in the state.
The state’s new Business and Consumer Services Agency, tasked with protecting consumers from financial fraud, issued a notice Thursday saying CoinFlip had violated state and federal laws by not better protecting its customers from fraud that was perpetrated through the company’s machines that exchange cash for crypto.
“An investigation by California's Department of Financial Protection and Innovation found that, over the past five years, CoinFlip failed to detect, prevent, report, and mitigate suspicious activity, paving the way for scammers to exploit Californians and steal their hard–earned money,” the California agency said in the release.
The regulators noted that some of the laws that were breached by CoinFlip are expressly to protect Californians using crypto kiosks.
CoinFlip didn’t immediately respond to a request for comment.
CoinFlip, which is based in Chicago and was founded in 2015, says on its website that it is the world’s “largest network of cryptocurrency ATMs by transaction volume.” It offers services at some 5,500 bitcoin ATMs in six countries, including 48 states in the U.S., according to the website. About 500 of the company’s crypto kiosks exist in California, typically at grocery and convenience stores or gas stations, according to the state agency.
Crypto fraud is an expanding part of schemes that target the elderly, including in scams where criminals lure consumers to provide funds under false pretenses, sometimes asking them to transfer money.
“Because transactions are immediate, hard to track, and cannot be reversed, crypto ATMs like those in CoinFlip's network have become the tool of choice for fraudsters looking to exploit consumers — especially older Americans,” the California release said.
California’s Business and Consumer Services Agency was conceived last year as part of a restructuring of state agencies by Gov. Gavin Newsom, a Democrat. The revised government structure was finalized in July of this year.
The action against CoinFlip “is the latest example of our work to ensure new technology actually helps people, rather than driving up prices or opening the doors to fraud — a key priority of California's consumer watchdog agency,” the release said.
Rohit Chopra was appointed in May to lead the new California agency. He formerly headed the Consumer Financial Protection Bureau during President Joe Biden’s administration, and left the CFPB post last year after President Donald Trump became president. Chopra also was Commissioner at the Federal Trade Commission until 2021 during Trump’s first administration.
With the start of the second Trump Administration, the CFPB’s workforce was chopped and the president’s leadership expressed an interest in shuttering the agency. The agency has since reversed course on policies that were put in place by Chopra, including with respect to emerging digital financial service offerings.
Chopra took a swipe at the Trump administration polices in the release announcing the state’s action against CoinFlip. His comments landed in a week in which Democrats broadly won elections nationwide, both at the federal and state levels. Newsom has widely been seen as a potential 2028 presidential candidate.
“As federal regulators give a free pass to crimes against consumers, California continues to chart a different path. While consumers can no longer rely on federal regulators to protect them, we are doubling down to ensure that new technology does not turbocharge fraud and that bad actors are held accountable,” the release said.
