Lewis Bell recounted interactions with distressed customers during his three-month stint handling support calls for Localcoin, Canada’s largest crypto ATM company, while working remotely from Toronto. Bell described most callers as victims of fraudulent activities and the emotional toll of delivering unfavorable news to them.
According to a report by Canada’s financial intelligence agency, crypto ATMs, operating legally nationwide, have emerged as the primary tool for scammers to exploit victims in the country. Former employees of these companies, including Bell, highlighted internal awareness of the issue, with some suggesting that a significant portion of the businesses’ revenue may stem from fraudulent transactions.
Marc Grens, a co-founder of a U.S. crypto ATM business, emphasized the reliance of these companies on scam victims for survival, leading to his decision to cease operations due to the overwhelming volume of fraud. Grens underscored the profitability challenge of prioritizing ethical practices in the industry.
Despite assertions from some operators that they do not profit from fraud and implement preventive measures, skepticism remains among industry experts like Toronto police Detective David Coffey, who questions the legitimacy of crypto ATMs based on the high transaction fees they impose compared to traditional exchanges.
Operators like HODL Digital Services argue that their profitability is based on small, legitimate transactions, with a focus on providing accessible cryptocurrency services. They stress the minimal impact of fraudulent activities on their overall operations and emphasize the convenience offered to customers.
Regulation of crypto ATM companies in Canada falls under federal anti-money laundering laws, requiring compliance with reporting and customer identification rules. Operators claim to exceed these requirements by implementing enhanced anti-money laundering measures and fraud detection protocols.
Efforts to combat fraud within the industry vary, with operators like HODL implementing mechanisms to detect and prevent potential scams at the transaction level. CoinFlip also emphasizes its ability to halt transactions for security reasons and provides refunds to fraud victims. However, challenges persist in achieving industry-wide compliance, as highlighted by Grens’ experience of facing resistance when advocating for stricter standards.
The industry’s future trajectory regarding fraud prevention and regulatory frameworks will be explored in the upcoming installment of the investigative series “Feeding Fraud: The Crypto ATM Problem.”