Court Ruling Favors Crypto ATMs, Not Victims
By Greg Collier
Two Iowans who fell victim to cryptocurrency scams will not get their money back, according to a recent ruling by the Iowa Supreme Court. In decisions released May 1, the state’s highest court sided with Bitcoin Depot, a third-party cryptocurrency ATM provider, over the victims of online fraud. The court reversed a lower court’s decision that would have allowed the victims to recover the cash they used to purchase bitcoin, which was later seized by law enforcement.
Both cases followed a similar pattern. The victims were approached online and told to deposit money at a Bitcoin ATM in Linn County. One was led to believe their online accounts were compromised, while the other was falsely accused of possessing illegal content. Each was instructed to convert their money into bitcoin and send it to a digital wallet controlled by scammers. Both individuals complied, transferring over $14,000 before realizing they had been defrauded. Investigators later seized the deposited cash from the ATM operator, but were unable to recover the bitcoin itself.
The question before the court was what should happen to the seized cash once it was no longer needed for the investigation. The Supreme Court ruled that Bitcoin Depot, as the ATM operator, was entitled to the money. The justices cited the company’s protocols, which include user prompts to confirm wallet ownership and warnings about scams. Because there was no evidence that the company knowingly facilitated fraud, the court concluded that it had a legal right to retain the funds.
While the legal rationale behind the decision may be sound within the framework of current commercial law, the outcome is difficult to view as anything other than anti-consumer. The victims in these cases were clearly manipulated by scammers using deceptive tactics that exploit fear and urgency. That they not only lost their cryptocurrency, but also the cash used to buy it, adds insult to injury. The court’s opinion effectively shields third-party facilitators from financial accountability, even when they serve as a conduit for criminal activity.
As it stands, this decision sends a message that victims of crypto fraud have few avenues for restitution, particularly when their money passes through intermediaries. It reinforces a growing perception that current laws lag behind the realities of digital financial crime. Consumers are left to bear the full burden of fraud, while companies that profit from the infrastructure used in these scams remain legally insulated.
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