Former employees allege fraud sustains Canada's crypto ATM industry
Nearly a dozen former employees of Canadian crypto ATM companies told CBC News that fraud involving scam victims is a known internal issue. Half believe their former employers would not be profitable without such transactions, while the others think profitability would simply decrease. Operators deny relying on fraud and claim to implement preventive measures.
In an investigative series by CBC News titled 'Feeding Fraud: The Crypto ATM Problem,' former employees from four Canadian crypto ATM companies described frequent encounters with fraud victims. Lewis Bell, who handled support calls for Localcoin from Toronto for three months, recalled the emotional toll: 'It's tough, basically breaking the worst news possible to someone... They're just grasping for the hope that we can refund it or return the money. And you have to be the one to say no, and in some cases, it was potentially [their] life savings … it dwells on you.'
The series' first part cited an internal report from Canada's financial intelligence agency, FINTRAC, stating that crypto ATMs have become the primary method for fraudsters to extract money from scam victims in Canada. All interviewed former employees confirmed this as a recognized problem within their companies. Half doubted their employers' profitability absent fraud-tied transactions; the other half believed profits would persist but at lower levels.
Localcoin, Canada's largest operator with about 30% of the ATMs according to Coin ATM Radar, did not respond to CBC's requests. Three other major operators—HODL Digital Services, Bitcoin Depot, and CoinFlip—asserted they do not profit from fraud and employ detection measures. HODL president Sam Mokbel, whose company runs 340 machines across Ontario, Quebec, Alberta, Manitoba, and Nova Scotia since 2018, said most transactions are under $1,000 and estimated undetected fraudulent ones at less than five percent, though not formally tracked. 'The vast majority of the transactions on our machines are under $1,000,' Mokbel stated. 'We don't think that scammers and money launderers are gonna waste their money, their time, just focusing on sending $500 here, $50 here.'
Bitcoin Depot emphasized legitimate small transactions around $200 for remittances or investments, while CoinFlip highlighted users like cash-dependent professionals. All three exceed FINTRAC requirements, which include registration, reporting large or suspicious transactions, and know-your-customer rules for amounts over $1,000. HODL's machines prompt users about potential scams and freeze high-value transactions for review, sometimes leading to refunds. CoinFlip limits daily transactions to $8,500 per customer and refunds fees to victims.
U.S. operator Marc Grens, who closed DigitalMint after running 1,400 machines, blamed fraud for the industry's issues. 'Without these scam victims, these victimizations, these companies wouldn't survive. These Bitcoin ATMs wouldn't exist,' he said. Grens noted that stricter compliance drove victims to less vigilant competitors. Canada leads globally with 91 crypto ATMs per million people, per TRM Labs, but fees of 15-30%—versus 4-5% on exchanges—draw scrutiny from Toronto police Det. David Coffey: 'I've yet to be convinced of an argument as to their legitimate usage — just based on the fees alone.' The top three operators manage 350 to 1,050 machines each, taking 16-19.9% cuts plus flat fees.