Tag: Bitcoin

A judge has ruled that a Bitcoin services company is the rightful owner of tens of thousands of dollars in cash seized by police after a man reported he had been fraudulently induced to deposit the money into one of the company’s ATMs.

Superior Court Judge Mark A. Hallal‘s order in the case addressed who had the right to $30,100 seized by Franklin police pursuant to a search warrant from an Athena Bitcoin ATM. The money had been deposited by Louis Courtemanche, who reported to police in March 2024 that he had been the victim of fraud.

The state and Courtemanche later jointly moved for the return of the cash to Courtemanche, but Hallal denied the motion. The judge decided instead that Athena obtained title to the funds as it acquired the money in good faith and without knowledge of the fraudulent activity.

“Athena gave valuable consideration by transferring the Bitcoin to the Bitcoin wallet [used by the perpetrator of the scheme] in exchange for the cash deposited into the ATM, as ordered by Courtemanche …,” Hallal wrote. “Once this exchange had occurred, the Bitcoin was irretrievable by Athena. Therefore, because Athena delivered Bitcoin in the amount equivalent to the cash Courtemanche deposited, Athena is the rightful owner of the funds seized.”

The decision is consistent with existing precedent, says Matthew G. Lindenbaum of the Boston office of Nelson, Mullins, Riley & Scarborough.

“To me, this is pretty straightforward,” says Lindenbaum, who represents financial technology companies, including those in the cryptocurrency industry. “The wrongdoers here are the criminals. That’s who the state should be pursuing, not the Bitcoin ATM operator. Just like in a wire fraud case, it’s not the fault of bank. If it were, you’d be turning the banks into the insurers of all fraud that can occur.”

That said, Lindenbaum sympathizes with Courtemanche.

“It’s heartbreaking,” he says.

However, Lindenbaum says the fact that Athena gave Courtemanche repeated warnings as he processed the Bitcoin transaction weighed heavily against his claim to the money.

“The operator of the Bitcoin ATM went out of its way to warn the unfortunate victim that this could happen,” Lindenbaum says. “They did more than they were required to do. If the decision here was otherwise, then no one would be able to operate Bitcoin ATMs.”

According to court records, Courtemanche told police that he became ensnared in the ploy on March 20, 2024, when he received a phone call from someone claiming to be from the U.S. Department of Homeland Security. The caller said Courtemanche had been implicated in a money-laundering scheme based on his name appearing on certain “seized packages.”

The caller gave Courtemanche a series of instructions to follow if he wanted to avoid arrest: (1) withdraw in small increments a total of $30,000 from his bank account; (2) proceed to a certain Smiley Gas Station in Franklin; and (3) purchase $30,000 in Bitcoin in small increments at an Athena ATM at the gas station.

According to Courtemanche, the caller told him to stay on the phone throughout the process.

Courtemanche heeded the instructions, withdrawing $30,100 from his account and purchasing $30,100 in Bitcoin at the ATM. He then deposited the Bitcoin he had purchased into a Bitcoin wallet address provided by the caller.

In initiating and completing the transaction at the ATM, Courtemanche was presented with Athena’s terms of service and other prompts warning about scams. For example, users were told not to use the ATM at the direction of government entities either to pay fees or taxes or for “the receipt of a package.”

The company further warned: “If you’ve been asked to insert a large amount STOP and think about what you are doing!”

Before completing the transfer into the wallet designated by the scammer, Athena required Courtemanche to declare: “I understand that scam artists often trick victims into using Bitcoin ATM and that I can safely STOP here and call Athena Bitcoin … or the AARP Fraud Watch helpline … for advice about my situation before making any purchase.”

Immediately after Courtemanche completed the transfer, the balance in the wallet was emptied. The perpetrator of the fraud was never identified.

After Courtemanche reported to police what had happened, the Norfolk County District Attorney’s Office obtained a search warrant on the ground that money that had been obtained under false pretenses had been deposited in the ATM. Police executing the warrant on March 26, 2024, seized $30,100 in cash from the Athena ATM.

In ruling that Athena was entitled to the funds, Hallal rejected Courtemanche’s argument that Athena had a heightened duty to prevent fraudulent transactions. The judge emphasized the multiple fraud warnings Athena had provided.

Athena did not respond to a request for comment. Counsel for the parties could not be reached for comment.

According to Lindenbaum, scams involving transfers of Bitcoin and other digital currencies have become appealing to criminals for one simple reason.

“As compared to regular fiat currency, once the Bitcoin has been transferred to a criminal, it becomes very easy for the criminal to just disappear with it,” he says. “It’s not going through the national banking system. The Bitcoin is just going to be in a wallet somewhere on the internet and the perpetrator could be on the other side of the world.”