Coinme Inc. describes itself as a company that started with a handful of Bitcoin ATMs but now has thousands, which is just one of the means by which it offers the public access to cryptocurrencies. In an Order dated October 25, 2024 and made public on November 4. 2024, Connecticut’s Banking Commissioner (the “Commissioner”) suspended Coinme’s ability to transfer money in Connecticut.
Connecticut participated in a multistate examination of Coinme in 2023, along with Colorado, Minnesota, Nevada, Ohio, South Dakota and Virginia. The review period of the investigation was from February 2021, through March 2023 and resulted in a Joint Multistate Report of Examination (“2023 ROE”) on July 17, 2023.
The Order alleges that Coinme engaged in the business of electronic money transmission and exchange and trade of virtual currency. And, it partnered with another company, not named (the “Company”), to enable customers to purchase virtual currency via the Company’s kiosks and MoneyGram agents, provide custodial wallets, and through its website and mobile application, allow the ability to buy, sell, custody, transfer and receive virtual currencies supported by its platform. Although the Company applied for a license to engage in the money transmission business in Connecticut on September 26, 2022, it subsequently withdrew its license application on March 22, 2023.
The 2023 ROE cited the following five federal law violations: (1) failure to file currency transaction reports within the required timeframe; (2) failure to collect social security or taxpayer identification number for customers who conduct currency transactions totaling over $10,000 a day; (3) failure to comply with the funds transfer rule and funds travel rule; (4) failure to establish an effective AML Program; and (5) failure to incorporate policies, procedures, and internal controls for complying with requirements for verifying customer identification.
Money transmission licensees in Connecticut engaging in virtual currency activities and issuing or selling stored value are required to maintain a minimum tangible net worth of $1 million, which the Order said Coinme had not maintained sine at least July 2022. And the Order referred to complaints of instances in which scammers directed consumers to engage in virtual currency transactions at Coinme’s ATMs that resulted in funds being transmitted to the scammers’ wallets. Coinme failed to have proper AML or Know Your Customer (KYC) policies, procedures and controls in place at the virtual currency kiosks used by Connecticut consumers to sufficiently verify ownership of the wallet in which virtual currency is deposited. Furthermore, Coinme failed to establish, enforce and maintain policies and procedures for supervising employees, agents and office operations that are reasonably designed to achieve compliance with applicable money transmission laws and regulations.
The Order concluded that Coinme’s conduct, such as that mentioned above, is likely to materially prejudice the interests of Connecticut consumers and cause Coinme to engage in unsafe or unsound practices as defined under Connecticut law. Those violations constituted sufficient grounds for the Commissioner to revoke and refuse to renew Coinme’s license to engage in the business of money transmission in Connecticut. Furthermore, the Commissioner was unable to find that Coinme’s financial condition was sound, or that its business will be conducted honestly, fairly, equitably, carefully and efficiently within the purposes and intent of the Connecticut statutes. Therefore, there was justification for a temporary order against Coinme to cease and desist from engaging in an unsafe or unsound practice within the meaning of Connecticut law.
Coinme has 14 days from receipt of the Order to request a hearing.
