Bitcoin ATM operator sued in MD for alleged elder financial abuse

by Ian Round

Bitcoin ATMs are primarily used for elder financial abuse, and the companies that own the ATMs let it happen, a lawsuit alleges.

The lawsuit says Athena Bitcoin — which operates 138 ATMs in Maryland and about 3,000 across the United States, Argentina, Colombia, El Salvador and Mexico — places ATMs in neighborhoods with high numbers of low-income people and seniors, charges high transaction fees and does little to prevent financial exploitation.

Diane Reynolds, 75, who lives in Leisure World, a senior community in Silver Spring, lost $13,000 in a scam. She sued Athena Bitcoin and Genesis Coin in February, seeking class status for Maryland seniors who were scammed.

“Upon information and belief, the primary use of Athena ATMs is transactions related to fraud perpetrated against elders,” the complaint states. “Defendants’ incentive to turn a blind eye to fraud is devastating to older adult victims.”

Reynolds sued on Feb. 6 in Montgomery County Circuit Court. Athena removed the case to federal court on April 23.

Reynolds is represented by state Del. Vaughn Stewart, D-Montgomery, and Matthew Thomas Vocci of the Timonium firm Santoni, Vocci & Ortega, as well as Fairfax, Virginia-based attorney Pat McNichol of Kelly Guzzo.

CNBC reported last fall that Bitcoin ATM scams are “soaring,” posing a threat to the cryptocurrency industry. Citing Federal Trade Commission Data, CNBC reported consumers lost more than $110 million to Bitcoin ATM scams in 2023, a “nearly tenfold” increase since 2020.

Reynolds’ lawsuit follows another proposed class-action suit against Athena in New Jersey.

Last December, there was a popup on Reynolds’ laptop warning of a security breach. She called a number she believed to be Apple. They asked her what bank she used, then pretended to transfer her to a Wells Fargo representative.

“The scammer claimed to be in touch with the Department of Justice,” the complaint states. “He told Plaintiff that the hackers planned to remove lots of money from her account and that she needed to withdraw it before they could do so. He instructed Plaintiff to take the cash to an Athena ATM ‘to be sure it would be encrypted.’ ”

The scammer sent a QR code, which Reynolds did not know was attached to the scammer’s bitcoin wallet. She gave $13,000, and was “alarmed” when they tried to make her deposit more money.

Athena’s website includes pages warning of potential misuse of their ATMs.

“Scammers are looking to say and do anything to convince you of a urgent need to pay through Bitcoin, and they will often ‘helpfully’ point out nearby ATMs where you can follow their commands,” one page says. “Scam artists like Bitcoin because transactions cannot be cancelled, reversed, or otherwise refunded once made.”

The complaint states that the defendants could take certain steps to prevent fraud, including transaction limits, holds on large transactions by first-time customers, the use of analytics to screen for fraud, and transaction receipts that would make it easier for law enforcement to trace the fraud.

“These types of measures are likely to be effective at stemming fraud, but they would also likely cut into Defendants’ bottom line,” the complaint states.

Athena and Genesis are represented by Cleveland-based attorneys from BakerHostetler. Terry Brennan, one of the lawyers, declined to comment.

Neither Athena Bitcoin nor Genesis Coin, which sold its ATMs to Athena, according to the complaint, responded to requests for comment Friday.

The complaint alleges violations of the Maryland SAFE Act — short for “Stop Adult Financial Exploitation” — and the Maryland Consumer Protection Act. It also brings claims of negligence and products liability, and asks for declaratory and injunctive relief.

It seeks certification of class status for all Marylanders, living or dead, who were victims of a scam involving an Athena ATM since February 6, 2020.

In an interview, Stewart — who represents Reynolds in the General Assembly — said sophisticated investors in cryptocurrencies don’t use Bitcoin ATMs, because the “skyhigh” fees, typically 20-25%, are far higher than fees imposed on other crypto transactions.

“The only reason you would use one of these is if you don’t know any better,” Stewart said. He said the machines are “perfectly suited to scam seniors.”

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Bitcoin ATM operator sued in MD for alleged elder financial abuse