California’s financial regulator has ordered cryptocurrency ATM operator CoinFlip to reimburse state residents after an investigation tied the company’s compliance failures to losses from scams carried out through its machines.
The California Department of Financial Protection and Innovation said in a November 4 order that CoinFlip must repay more than $4.8 million to fraud victims and return over $350,000 in fees it said were improperly charged. The agency also directed the company to halt illegal or deceptive practices and said it will continue to monitor the business.
Regulator details reimbursement order
According to the Department of Financial Protection and Innovation, California residents lost more than $4.8 million through scams involving CoinFlip-operated crypto ATMs. In addition to making those victims whole, the company was ordered to return more than $350,000 in fees collected in connection with the transactions.
Taken together, the order requires CoinFlip to repay more than $5.1 million. The state’s action focuses on consumer losses and fee charges linked to the operation of the machines in California.
Findings centered on anti-fraud controls
The state investigation found that CoinFlip did not adequately meet anti-fraud obligations that applied to its ATM business. The regulator said those shortcomings included failures in user identity verification and in detecting suspicious transactions.
DFPI also said CoinFlip allowed transactions above the $1,000 daily limit without providing the required disclosures. In the regulator’s view, those gaps made it easier for criminals to move victims’ money through the machines.
How the scams were carried out
Crypto ATMs are commonly located in everyday retail settings such as grocery stores, gas stations, and convenience stores. Regulators said scammers used those machines as part of schemes in which victims were persuaded to convert cash into cryptocurrency.
The department said fraudsters have posed as government officials or customer support representatives to pressure people into withdrawing cash and depositing it into a crypto ATM. Once the funds were converted, the cryptocurrency was then sent to wallets controlled by the scammers, making the losses harder to recover.
What happens next
Beyond the repayment and fee refunds, the state ordered CoinFlip to stop illegal or deceptive conduct tied to its California operations. The regulator said it will continue oversight of the company following the enforcement action.
The confirmed next step is enforcement of that order, with DFPI maintaining supervision as CoinFlip addresses the reimbursement requirements and the compliance issues identified in the investigation.
Source: en.bloomingbit.io