Coinme Ordered to Refund $8.4 Million to Customers

Coinme, a Seattle-based startup that sells bitcoin and other cryptocurrencies through kiosks, has been ordered to refund $8.4 million to customers. This directive comes from the Washington State Department of Financial Institutions, which issued a temporary cease-and-desist order on November 25, 2023, amid allegations that Coinme inappropriately recorded unredeemed voucher funds as its own income.

The investigation revealed that customers who waited too long to redeem their vouchers on Coinme's website were misled about the redemption practices, with the unredeemed funds for the years 2023 and 2024 totaling $8,372,076, according to state documents.

Coinme, which operates in tens of thousands of locations and reported revenues exceeding $1 billion in 2024, has requested a hearing regarding the matter. The company's chief compliance and consumer protection officer, Ben Enea, stated that Coinme discontinued the voucher product over two years ago but has always honored every voucher ever purchased.

He emphasized that Coinme treated unredeemed voucher payments similarly to how major retailers handle unredeemed gift cards and that this procedure followed standard industry practices, reviewed by the company’s auditors.

Coinme was founded in 2014 by Neil Bergquist and Michael Smyers to make digital currencies accessible through a network of ATM-like kiosks. Their first state-licensed bitcoin ATM was opened in Seattle's Belltown neighborhood in May 2014.

However, the company has faced regulatory scrutiny in the past, including a $300,000 penalty earlier this year related to a scam incident involving a California woman who used Coinme services to pay scammers $50,000.

Additionally, Coinme had a lawsuit against Coinstar, a partner that had launched a competing cryptocurrency platform, which was resolved in February 2024. In the current case, Washington state alleges that Coinme failed to disclose material information regarding the timeframe for redeeming vouchers and listed an inactive customer support number on the vouchers.

The company is required to cease all business operations in Washington, except for returning assets to customers, but existing customers can still withdraw assets. Coinme claims it was not made aware of the state’s concerns until the cease-and-desist order was announced, with Enea stating that they were never contacted during the investigation process, as indicated in state filings.