Woman scammed into converting $15K into Bitcoin sparks legal battle between crypto kiosk manager, McLennan County Sheriff’s Office

KWTX News 10 at 10 PM: 6.13.23 (A Segment)
Published: Jun. 13, 2023 at 5:54 PM CDT|Updated: Jun. 13, 2023 at 5:57 PM CDT
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WACO, Texas (KWTX) - An 82-year-old Crawford woman who scammers convinced to convert $15,000 in cash into Bitcoin cryptocurrency has sparked a legal battle between the operators of the ATM-like Bitcoin machine and the McLennan County Sheriff’s Office, which seized cash from the machine and returned it to the woman.

Lux Vending, which does business as Bitcoin Depot, alleges in its suit that the sheriff’s office unlawfully seized the cash from one of its kiosk machines and returned the money to the woman without following proper due process procedures. The suit, filed in Waco’s 74th State District Court, asks Judge Gary C. Coley to conduct a hearing on the dispute and to declare Bitcoin Depot the rightful owner of the seized cash.

No hearing has been set in the case.

“While the company is sympathetic to the victimized customer, as stated in the petition, the actions taken by the McLennan County Sheriff’s Office are unlawful and violate Bitcoin Depot’s rights under both the Texas and U.S. Constitutions,” said Houston attorney John MacVane, who represents Lux Vending. “Bitcoin Depot looks forward to making our arguments in court and seeking the return of our property.”

McLennan County Sheriff Parnell McNamara said despite the accusations in the lawsuit, his officers “did everything right” and the Bitcoin Depot officials “can go to hell.”

WEB XTRA: Sheriff Parnell McNamara discusses the case and lawsuit

“It’s a bunch of hogwash,” McNamara said of the lawsuit. “As far as I am concerned, they are a bunch of vultures who want to take the money back from this person who has already been victimized. I think it is a real travesty. The money does not belong to them. It was scammed. It still belongs to the lady who put it in there. So I think it is preposterous that they have filed this lawsuit.

“… But it will be a cold day in hell that they get this money back from our good citizen, who has already been scammed and traumatized,” he said.

The woman who reported she was scammed did not return phone messages from KWTX on Tuesday.

She reported the elaborate scam to the sheriff’s office on April 27, and a detective got a search warrant from 19th State District Judge Thomas West on May 3 to seize the woman’s money from the Bitcoin Depot at a Sunoco store at 7500 Bosque Blvd.

According to the search warrant affidavit, the woman said she was online looking up cooking recipes when she received an email with a link to view a recipe. She clicked the link, which the affidavit said appears to have activated a “Ransomware” computer virus.

She contacted “customer support” and was transferred to a “fraud investigator,” the affidavit states. She was told all her personal information had been compromised and that the fraud department could help her work through the problem.

The woman said she should contact her bank and law enforcement but was told it was not necessary because at that point, nothing had happened with her bank account and a “computer virus” was not something law enforcement would respond to, according to the affidavit.

The 82-year-old Crawford woman was scammed into turning $15,000 into bitcoin at a Central Texas...
The 82-year-old Crawford woman was scammed into turning $15,000 into bitcoin at a Central Texas cryptocurrency kiosk.(KWTX GRAPHIC)

Next, the “fraud investigator” asked if she had written a check for a laptop. She said no, and the “fraud investigator” said a check just cleared the bank that someone wrote to pay for a laptop.

“The ‘fraud investigator’ then told (the woman) he could see where a check was written to a construction company in the amount of $15,000, which had not cleared yet. (The woman) was then given instructions on how to prevent the loss of this amount of money,” the affidavit states.

The woman was told to drive to her bank, make a $15,000 cash withdrawal and then go to the store at 7500 Bosque Blvd. and deposit it into the Bitcoin machine. She said she knew nothing about Bitcoin and told the man she was going to call law enforcement.

“(The woman) said the person on the phone stressed that essentially the longer she took to get the money out of the bank the closer the check could be to clearing,” the affidavit says. “(The woman) said she followed the instructions and that the guy stayed on the phone with her the entire time. (The woman) said she deposited $15,000, $100 at a time.”

McNamara said, coincidentally, that when his officers arrived to serve the search warrant on the kiosk machine, the armored car company hired to service the machine pulled up to the store.

“While we were there with the search warrant, the armored car people came and we served them with the search warrant,” McNamara said. “We were going to get in the machine one way or the other because we had a legal search warrant. The $15,000 she put in the machine was still in the wallet that she had put it in. So we retrieved that $15,000 and brought it back to the office. We photographed it, put it into evidence and ultimately got it back to the victim so she wouldn’t be further traumatized by these creeps.”

The Bitcoin Depot lawsuit against the sheriff’s office alleges the search warrant “only permitted the MCSO to seize the $15,000 ‘for evidentiary purposes,’ not for return of stolen property, forfeiture, or restitution.”

“Notably, Bitcoin Depot was not served with the search warrant before or at the time of execution – it only received it after the seizure had already been executed,” the suit alleges. “On May 3, 2023, Bitcoin Depot received the search warrant at issue from its armored car service contractor.”

McLennan County District Attorney Josh Tetens, whose office advised the sheriff’s office before it secured the search warrant, said he thinks the issue now is “moot” since the money was returned to the woman and is no longer in possession of the sheriff’s office.

McNamara said the disputed issue is no different than his agency recovering stolen cars, guns or four-wheelers and returning them to their rightful owners.

“As soon as we possibly can, we return those stolen items to the victims, and that’s what we did in this case,” McNamara said.

The lawsuit contends that the owners of the Bitcoin Depot were not the scammer, they did nothing wrong and the money the woman put into their machine now belongs to them.

McNamara said he would like to say that the investigation is ongoing. However, he claims Bitcoin “will not work with any law enforcement.” He said officers believe the scammer in this case is in another country.

MacVane, Bitcoin Depot’s attorney, disputed McNamara’s claims, saying the company “pledged to cooperate in any way possible” to assist the investigation into “catching the bad actor and recovering the Bitcoin.”

“We also immediately notified law enforcement of our policy to refund our fees on this transaction to the customer,” MacVane said. “Unfortunately, in response, the McLennan County Sheriff’s Office seized the cash from Bitcoin Depot’s machine even though Bitcoin Depot had already transferred the Bitcoin as the customer instructed.

“This essentially made Bitcoin Depot suffer the entire loss despite its extensive efforts and warnings to prevent this type of fraudulent activity,” he said.

MacVane said in a statement that “Bitcoin Depot operates a nationwide network of Bitcoin ATM kiosks to provide crypto‐financial services and products to the community—including those who have been historically underserved by traditional financial institutions.” He said the company’s operations are heavily regulated, and it has extensive compliance and consumer protection policies to prevent fraud and illicit activity.

“For example, Bitcoin Depot’s terms and conditions—which all customers must agree to—prohibit customers from sending Bitcoin to unknown digital wallets,” he said in the statement. “The company also provides numerous scam warnings at its machines in nearly every stage of a consumer transaction to prevent individuals falling victim to frauds and scams.”