Connecticut Banking Commissioner Jorge Perez announced Monday that his agency has reached a settlement agreement with Bitcoin of America, which had been operating virtual currency kiosks in the state without obtaining the proper license.
Virtual currency kiosks allow consumers to purchase virtual currency with cash. Four Connecticut consumers who patronized these kiosks fell victim to scams, losing tens of thousands of dollars, according to Perez.
As a result of the consent order, Bitcoin of America made restitution to those consumers totaling $86,000. Following a criminal indictment, Bitcoin of America is also winding down operations in Connecticut, Perez said.
“This case highlights the need to be cautious when using virtual currency kiosks,” Perez said. “Scammers are preying upon consumer’s vulnerabilities and tricking them into depositing cash into kiosks, which can be found throughout the state. The Department is taking steps to be sure that the owners and operators of these kiosks are properly licensed and adhere to the law.”
Because the kiosks transferred consumers’ funds to third parties, Bitcoin of America was required to be licensed as a money transmitter, according to the banking department. The consumers fell victim to scammers who convinced them they were from legitimate companies, including banks, electrical and internet supply companies.
The scammers directed the consumers to deposit cash into these virtual currency kiosks with a QR code, provided by the scammer, to supposedly safeguard their money. Instead, the consumers were depositing the cash into the kiosk, purchasing virtual currency, which was then transmitted to the scammer’s virtual wallet, regualtors said.
This resulted in the consumer losing their funds.
To further combat this growing problem, the Department of Banking and Connecticut State Police have submitted a bill this legislative session that would allow the banking commissioner to adopt regulations around virtual currency and other digital assets, Perez said.
In addition, the legislation would explicitly require that virtual currency kiosks be licensed as money transmitters in the state.
