UPDATES & ANALYSIS

Bitcoin ATM operator entitled to return of money seized by law enforcement, Iowa Supreme Court holds

by Rox Laird | May 21, 2025

Two Iowans who deposited cash into bitcoin automated teller machines, as they say they were instructed to do by scammers, will not receive their money back as a result of two Iowa Supreme Court rulings saying the owner of the ATM had the better argument that it was legally entitled to the cash seized by Linn County authorities investigating fraud.

The Court announced its rulings in two separate decisions handed down May 16. The lead decision, In the Matter of Property Seized for Forfeiture from Bitcoin Depot Operating, and Bitcoin Depot Operating v. Carrie Carlson, was written by Justice Dana Oxley and joined by all members of the Court. The Court issued an unsigned per curiam opinion in a companion case involving very similar facts that was controlled by the lead decision. [Disclosure: Nyemaster Goode attorneys Matthew A. McGuire, Kevin Collins, and Roy Leaf represented the appellant Bitcoin Depot Operating in both cases.]

In the lead case, Carrie Carlson deposited $14,100 in $100 bills into a Bitcoin Depot ATM in Cedar Rapids and received an equivalent amount in bitcoin, which was placed in a third-party bitcoin wallet as Carlson was instructed by the third party. She later concluded she had been scammed and informed the Linn County Sheriff’s Department, which in the course of its investigation seized the cash from the Bitcoin Depot ATM.

After the seized cash was no longer needed for the Linn County investigation, Bitcoin Depot filed an application for return of seized property; Carlson filed a motion to intervene and a claim for return of the cash to her. The district court subsequently ordered the Linn County Sheriff’s Office to return the seized funds to Carlson.

In its appeal of that ruling to the Iowa Supreme Court, Bitcoin Depot argued the seized cash is the company’s property because it transfers bitcoins from its own inventory to the wallet as directed by the person making a bitcoin purchase.

The company pointed out that it warns depositors in its terms of service displayed on the ATM screen that bitcoin purchases must be deposited in a bitcoin wallet owned by the person making the deposit and it warns that other wallets provided by third parties could be scams. It argues that Carlson represented to Bitcoin Depot that she owned the bitcoin wallet where she directed bitcoin to be transferred.

Carlson acknowledged she had entered into a binding contract under Bitcoin Depot’s terms and conditions when she deposited cash into the ATM, but she argued that her money was taken from her by a third-party criminal act and that returning the seized funds to Bitcoin Depot “would continue to victimize Ms. Carlson for crimes committed against her.”

Citing common law principles of contract law, she argued that she is entitled to possession of the seized funds because the contract is voidable due to third-party duress and the warning on the Bitcoin Depot ATM screen shows that Bitcoin Depot had “reason to know” of Carlson’s duress.

The Court disagreed, saying “there is no evidence in the record before us that Bitcoin Depot had reason to know that a scammer had contacted Carlson and told her that she needed to purchase Bitcoins from the Bitcoin ATM and transfer them into a specified wallet to avoid her accounts being impacted.”

“Bitcoin Depot’s generalized knowledge that sometimes scammers try to defraud people into transferring Bitcoins using Bitcoin’s irreversibly encoded technology is insufficient to establish that Bitcoin Depot had ‘reason to know’ of Carlson’s particular duress,” Justice Oxley wrote. “Carlson attempts to turn a warning against fraud into an admission of liability. That Bitcoin Depot recognizes how its ATMs could be misused and tries to warn its customers and make them more difficult to misuse does not in and of itself undermine the validity of the contract between Bitcoin Depot and the depositing customer just because a scammer is successful.”

Tags: Iowa Supreme Court 2024-25