Crypto ATMs Branded as Fraud Pipelines in Landmark DC Lawsuit

Financial innovation can often collide with the reality of consumer risk.

A lawsuit filed Monday (Sept. 8) the District of Columbia (D.C.) against Athena Bitcoin, one of the country’s largest operators of Bitcoin Automated Teller Machines (BTMs), does more than just accuse one company of predatory practices against an aging population perennially targeted by scammers.

The complaint by the Washington, D.C., Attorney General Brian Schwalb, which alleges that Athena profited from rampant fraud and systematically exploited vulnerable residents, reads like a case study in how emerging technologies can magnify old risks when regulatory guardrails fail to keep pace.

The filing places the entire cryptocurrency ATM industry under a microscope.

At the heart of the case is stark data. In the first five months after Athena began operating its kiosks in Washington, 93% of all deposits were tied to scams, according to the attorney general’s analysis of complaint and transaction records. The median victim was 71 years old, and the median loss per transaction was $8,000.

“Athena’s bitcoin machines have become a tool for criminals intent on exploiting elderly and vulnerable District residents,” Schwalb said in a Monday press release. “Athena knows that its machines are being used primarily by scammers yet chooses to look the other way so that it can continue to pocket sizable hidden transaction fees.”

The financial restitution for scam victims in Washington is not the only thing at stake. The scope of the showdown could also implicate the broader legitimacy of crypto kiosks in the United States.

These machines, often tucked inside gas stations and convenience stores, are marketed as a gateway to financial freedom, offering access to digital currencies.

Yet according to the lawsuit, Athena’s ATMs functioned more like pipelines for international fraud, channeling millions to scammers while extracting hefty, undisclosed fees along the way.

See also: Multibillion-Dollar Crypto Scams Reveal Hard Lessons for Global Businesses

A Fraud Pipeline

The mechanics of the BTM scams were depressingly familiar. Fraudsters posing as bank representatives, law enforcement agents or tech support specialists persuaded victims that their savings were at risk. They instructed them to withdraw cash and feed it into Athena’s bright-orange kiosks, often while remaining on the phone to prevent hesitation.

Once the cash was inserted, Athena converted it to bitcoin and sent it to digital wallets controlled by the scammers. The transactions, irreversible by design, left victims with little recourse.

The fraud allegations alone would be damaging. But the district’s complaint goes further, painting Athena as an active profiteer rather than a passive conduit.

The company, according to its own SEC filings, derives its revenue from a markup embedded in the bitcoin “exchange rate” displayed on its machines. While mainstream crypto exchanges such as Coinbase or Kraken typically charge fees of under 3%, Athena’s kiosks imposed markups of 13% to 26% without explicitly disclosing them.

For scam victims, these hidden fees compounded the damage. Had Athena disclosed its markup clearly before transactions, some might have realized the absurdity of paying a quarter of their savings in service charges and questioned the legitimacy of the instructions they were following. Instead, the company’s opaque practices made it easier for scammers to succeed and harder for victims to grasp the full scope of their losses.

Equally problematic was Athena’s reliance on a “Pledge of Ownership” system, which required customers to tick boxes confirming that the wallet address belonged to them. Many elderly victims, unfamiliar with crypto terminology, simply clicked through. The company, however, continued to process deposits even when multiple customers had pledged ownership of the exact same wallet—an obvious red flag that the address was being used in a scam.

Read more: Bitcoin ATMs Clustered in Black, Latino and Low-Income Neighborhoods

The Road Ahead

The case of District of Columbia v. Athena Bitcoin is a litmus test for how aggressively regulators will confront the darker consequences of financial innovation and whether companies profiting from those consequences will be forced to change course.

The lawsuit is far from resolved. Athena may contest the district’s claims, arguing that it provided warnings, that fees were disclosed implicitly in exchange rates, or that consumers bore responsibility for their transactions. It may also point to industry norms, where double-digit ATM fees are not uncommon, and question whether regulators are unfairly singling out one operator.

But the broader narrative is already clear. The district’s case reframes crypto ATMs from neutral tools to active enablers of fraud, and it seeks to hold operators accountable for systemic harm. Whether or not the court agrees, the lawsuit will set a new benchmark for what regulators consider unacceptable in the intersection of FinTech and consumer protection.

More recently, after all, the government of New Zealand called for a ban on crypto ATMs.