California Fines Coinhub $675K for Crypto ATM Violations

The California Department of Financial Protection and Innovation (DFPI) announced on Friday that it had levied substantial penalties against LSGT Services, LLC, which operates under the name Coinhub, following an investigation that revealed multiple violations of California’s Digital Financial Assets Law (DFAL). According to the regulator’s findings, since 2024 Coinhub had been charging markup fees above the legally permitted maximum, accepting cash transactions that exceeded the $1,000 daily limit, omitting critical information from customer receipts, and failing to provide legally required disclaimers before transactions were completed.

DFPI Commissioner KC Mohseni issued a stark warning to the industry in an official statement, declaring: “Crypto kiosk operators in California are on notice that we intend to root out bad actors and scammers who put consumers’ hard-earned money at risk. We welcome legitimate operators in this industry, however, DFPI will not tolerate those who flout the law and fail to implement required safeguards for customers.” The $675,000 penalty includes $105,000 specifically designated as restitution to California consumers who were charged more than the allowed maximum fees for crypto ATM transactions.

The Coinhub case marks the fourth enforcement action taken by the DFPI against crypto ATM operators in recent months, signaling a coordinated regulatory crackdown on an industry that has operated with limited oversight. In June, the department took its first enforcement action under the DFAL, fining Bitcoin ATM operator Coinme $300,000 for similar violations, with $51,700 of that amount earmarked for restitution to California customers. These consecutive actions demonstrate the regulator’s commitment to enforcing compliance with the state’s digital asset regulations.

The enforcement pattern reveals consistent violations across multiple operators, including charging excessive fees, failing to implement transaction limits, and neglecting consumer protection measures. The DFPI’s systematic approach suggests it has developed specialized expertise in identifying non-compliant crypto ATM operations and is applying that knowledge across the industry. This regulatory focus comes as California works to establish itself as both a hub for legitimate digital asset innovation and a jurisdiction with robust consumer protections.

California’s regulatory actions coincide with growing global concern about crypto ATMs being used in financial scams and other illicit activities. The city council in Spokane, Washington recently voted unanimously to ban the kiosks entirely due to their association with increased scams and financial crime. Similarly, New Zealand banned crypto ATMs in July, citing rising financial crime concerns as the primary justification for the prohibition.

Law enforcement agencies across the United States have documented numerous scam schemes involving Bitcoin ATMs. Earlier this week, police in Massachusetts issued warnings after two residents lost nearly $7,000 total to Bitcoin ATM scams that used a sophisticated scheme claiming payments were due for missing jury duty. In August, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued an urgent warning specifically addressing the use of Bitcoin ATMs in scams and their disproportionate impact on elderly Americans.

The scale of the problem is reflected in FBI data showing that elderly Americans lost nearly $3 billion to crypto fraud in 2024, despite representing only about 17% of the population. This demographic vulnerability has prompted regulators and law enforcement to prioritize consumer protection measures in the crypto ATM space, with California’s enforcement actions representing one front in a broader regulatory battle against fraudulent operators and inadequate consumer safeguards.