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Grosse Pointe Farms, a small town just outside Detroit, has passed a local ordinance aimed at controlling crypto ATM use—even though the town doesn’t have any yet. The city council voted unanimously on the new rules after hearing about a scam that targeted a resident in nearby St. Clair Shores.

The incident involved a crypto ATM, which scammers instructed a local to use for sending money. That case helped push council members to act early, hoping to protect their residents from similar schemes.

New Rules Target Scam Risks

During Tuesday’s city council meeting, concerns were raised about how easily scammers convince people—especially the elderly—to use crypto ATMs to send money. Council member Lev Wood said the machines create a situation that lacks transparency, making people easy targets.

The new rules require any crypto kiosk in town to be registered with the Department of Public Safety. Operators must also apply for a business license and provide written warnings on the machines about the risks of fraud and irreversible transactions.

One of the biggest parts of the ordinance is a spending cap for new users. The law sets a $1,000 daily limit and a $5,000 cap over the first 14 days of use. After that period, those restrictions are lifted. The idea, according to city attorney Bill Burgess, is to give new users time to understand how the machines work before making larger transactions.

Several other states are also taking action. Arizona, Nebraska, California, and Washington have all stepped in this year to add restrictions or outright bans on certain types of crypto ATM operations.

Coinflip Shares Firsthand Scam Story

Carson Gat, a representative from Coinflip—a Chicago-based digital currency ATM operator—attended the meeting to give his perspective. He told the council about a time he personally helped stop an elderly woman from getting scammed at one of their machines.

Gat said Coinflip has explored similar limits on new users to reduce fraud, since most scams happen during a customer’s first visit. Coinflip has been operating in Michigan since 2019 and was granted a money transmitter license in April.

While the company didn’t oppose the town’s new rules, it did highlight the importance of finding a balance between access and safety. Gat’s appearance also added weight to the council’s concern that this type of scam isn’t just theory—it’s happening.

State And National Action Picking Up

This move by Grosse Pointe Farms comes after Michigan Attorney General Dana Nessel issued a statewide alert about crypto ATM scams back in April. Nessel’s office has warned residents to stay away from machines when someone instructs them to deposit money under pressure.

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The ex-CEO of a small bank reportedly sent shockwaves through a small American community when he fell for an elaborate crypto scam, causing over $47 million in damages and wiping out generational wealth.

In August of last year, Shan Hanes, the former CEO of Heartland Tri-State Bank (HTSB) in Elkhart, Kansas, was sentenced to 24 years in prison for funneling the bank’s money into a cryptocurrency scheme that turned out to be a blatant scam.

The Justice Department said that Hanes had fallen victim to a pig butchering scheme, a widespread type of scheme where scammers build relationships with their targeted victims to lure them into making fraudulent investments.

A new report from the New York Times details how the collapse of the bank – in which many townspeople held investments – affected the community.

In July of 2023, the Kansas banking commissioner showed up at the bank to announce that the lender would be shut down and transferred over to a new company. While the deposits were insured, shares of HTSB had become completely worthless, erasing many of Elkhart residents’ retirements, savings and emergency funds.

Jim Tucker, who served on HTSB’s board with his father, described how Hanes repeatedly convinced his colleagues and the community to keep borrowing money to “invest” in the scam. The Tucker family lost $1.4 million worth of HTSB shares, wealth that was meant to be passed on to their children.

A pair of brothers, Moe and John Houtz, lost hundreds of thousands of dollars from HTSB’s collapse.

And Hanes himself drained his own personal savings, then began stealing directly from his local investment club, his church and from HTSB’s reserves.

Says U.S. Attorney Kate E. Brubacher,

“Hanes’ greed knew no bounds. He trespassed his professional obligations, his personal relationships, and federal law. Not only did Shan Hanes betray Heartland Bank and its investors, but his illegal schemes also jeopardized confidence in financial institutions.”

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