Minnesota Launches First State Fraud Fund After Crypto Scams Target Senior Citizens

• Lawmakers are reviewing a bill to ban crypto kiosks statewide amid rising fraud cases.
• State data showed $540,000 in reported losses last year, with seniors hit the hardest.
• Crypto companies say better regulation and enforcement would be more effective than banning the machines.

Minnesota has set up the first state-run fraud restitution fund in the country to help people who have been victims of scams, while lawmakers are trying to ban crypto kiosks in the state.

According to a non-profit organization geared towards older Americans, the fund is meant to help people get back on their feet financially and stabilize their finances, even though it won't fully reimburse most victims. Minnesota has passed separate consumer protection laws to stop scams involving cryptocurrencies, in addition to the restitution fund. 

Crypto ATM Ban

The bill, HF3642, sponsored by Rep. Erin Koegel, co-chair of the House Commerce Finance and Policy Committee, aims to prohibit the virtual currency kiosks across the state. The state currently has about 350 licensed kiosks operated by eight to 10 companies, according to the Department of Commerce. The bill was introduced on Monday and discussed on Thursday to prevent the rising scams against the elderly of the state. 

Police told lawmakers on Thursday that scammers tell victims to put cash into these machines. The money is turned into cryptocurrency and sent to accounts controlled by the scammers. Once sent, it is very hard to track or get back. They added that the scams were mostly hurting senior citizens. 

Woodbury Detective Lynn Lawrence told the House that officers once found an older woman confused at a gas station crypto kiosk. She had already made “at least 10 Bitcoin transactions in six months.” Lawrence added that the woman “had been giving 50% of her income per month to the scammers” and was scared she might have to live in her car.

The Department of Commerce reported 70 complaints last year totaling $540,000 in losses. Refunds averaged only 16% of total losses. While the discussions are ongoing, the House Commerce Committee has not yet voted on the bill. On Thursday, lawmakers said they may add it to a larger commerce bill later in the session.

Blockchain security firm PeckShield Alert reported that 15 crypto-related hacks were recorded in February alone, totaling about $26.5 million, with funds moving quickly across wallets, making recovery difficult. The top five hacks pointed out were YieldBlox at $10 million, IoTeX Bridge at $8.8 million, CrossCurveFi at $3 million, FOOMCASH at $2.26 million, and Moonwell at $1.8 million. On Sunday, Georgia hosted an event to help users identify crypto scams. 

Industry Calls For Regulation, Not Prohibition

Crypto industry representatives, however, resisted the ban in Minnesota. For instance, CoinFlip general counsel Larry Lipka told lawmakers, “It is inappropriate to ban a legal product because fraud is happening. Not our fault.” He added that machines should not be illegal, since scammers are responsible for the crimes, not the kiosk operators. He said he supports stricter rules and better enforcement instead of a full statewide ban. 

Read also: HYPE Rallies While Traders Flood Oil, Gold And Bitcoin Perps Amid Iran Tensions

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