California regulators levy stiff penalties against Bitcoin ATM operators

Several operators of cryptocurrency kiosks found in public places like convenience stores and shopping malls have been ordered by California regulators to pay hundreds of thousands in fines.

On Thursday, the California Department of Financial Protection and Innovation announced multiple crypto kiosk operators were fined for overcharging California consumers.

Among the companies ordered to pay is a Nevada-based company called LSGT Services, LLC, better known as Coinhub, whose “Bitcoin ATMs” can be found across the country. The Bitcoin ATMs allow users to purchase and sell digital assets with real cash.

The transactions are often instant and non-refundable, and many kiosk users tend to be older customers.

DFPI officials said Coinhub specifically charged fees and markups that were “well above” the legal limit, accepted cash transactions greater than the $1,000 limit, and failed to provide legal disclosures or omitted important information on receipts, including customer names and exchange sources.

Coinhub was ordered to pay $675,000 in penalties, including $105,000 in restitution to refund certain California consumers.

Since June, DFPI has also fined Wyoming-based Coin Time LLC, and local kiosk operator Anh Management, LLC, better known as Hermes Bitcoin.

Those companies are accused of failing to collect appropriate identifying information, which is required by law, in order to prevent money laundering through digital currencies. Those companies have also been ordered to pay restitution for overcharging customers.

Another crypto kiosk operator, Coinme, was fined $300,000 earlier this year, including more than $50,000 in restitution, for violating state laws regarding the sale and movement of cryptocurrencies. DFPI said Coinme has agreed to institute new measures to prevent future violations.

“Crypto kiosk operators in California are on notice that we intend to root out bad actors and scammers who put consumers’ hard-earned money at risk,” said DFPI Commissioner KC Mohseni. “We welcome legitimate operators in this industry, however, DFPI will not tolerate those who flout the law and fail to implement required safeguards for customers.” 

DFPI says California has among the most robust consumer protection laws in the nation regarding cryptocurrencies, and the agency vows to continue taking “stringent enforcement actions against other unscrupulous crypto kiosk operators.”

If you suspect you’ve been the victim of a scam or fraud related to cryptocurrency, you can submit a complaint through the DFPI website or by calling 866-275-2677.