Coinme, a Seattle-based startup that sells bitcoin and other cryptocurrencies through kiosks, has been ordered to refund $8.4 million and temporarily halt sales in Washington.
A temporary cease-and-desist order was issued Nov. 25 by the Washington State Department of Financial Institutions after an investigation into Coinme vouchers that customers could buy at kiosks and later redeem for cryptocurrency.
For customers who waited too long to redeem their vouchers on Coinme's website, Coinme inappropriately recorded the unredeemed funds as its own income, according to an accompanying statement of charges filed by the department. The state also said Coinme misled consumers about its redemption practices, among other violations.
Unredeemed funds for 2023 and 2024 totaled $8,372,076, state documents say. Coinme, which was founded in 2014 and operates in tens of thousands of locations, reported revenues of more than $1 billion in 2024.
Because Coinme's actions are likely to cause immediate and irreparable harm to Washington consumers," the state ordered the company to temporarily halt "ongoing operations" in Washington while regulators seek to revoke the company’s state license, according to a statement on the department's website.
Coinme has requested a hearing into the matter.
Coinme also said it discontinued the voucher product more than two years ago but has "always honored, and will continue to honor, every voucher ever purchased," according to a Tuesday statement by Ben Enea, Coinme's chief compliance and consumer protection officer.
Enea said Coinme "treated unredeemed voucher payments the same way major retailers treat unredeemed gift cards," and that the procedure followed standard industry practices and was reviewed by the company's auditors.
Coinme was launched in Seattle a decade ago by entrepreneurs Neil Bergquist and Michael Smyers, who wanted to make then-novel digital currencies readily accessible to consumers through a network of ATM-like kiosks.
Until then, consumers looking to buy bitcoin or other cryptocurrency typically had to navigate an arcane and often-shadowy world of online trading platforms, and could use their crypto only for online purchases.
Coinme's "Bitcoin ATMs," as they were dubbed, let consumers buy crypto with cash, and eventually, debit cards, and also sell their crypto for cash.
In May 2014, Coinme opened the first state-licensed bitcoin ATM at the Spitfire Grill, in Seattle's Belltown neighborhood, following months of effort getting licensed as a "money transmitter."
At the time, bitcoin was trading for around $450, but would top $19,000 within a few years and, despite massive volatility, remains around $98,000 as of Wednesday.
That price surge helped fuel Coinme's rapid growth.
In 2019, Coinme announced a partnership to sell cryptocurrency via Coinstar, a Bellevue-based company whose kiosks let consumers exchange loose change for cash or credit.
“We see kiosks or ATMs as a gateway, a frictionless onramp to digital currency, and a better financial future,” Bergquist, then Coinme’s CEO, told The Puget Sound Business Journal in 2021.
But the cryptocurrency world has been dogged by controversy, including scams and allegations of money laundering. Coinme has seen its share of unwelcome headlines.
Earlier this year, Coinme agreed to pay a $300,000 penalty in a case brought by the California Department of Financial Protection and Innovation.
The penalty was related to a 2024 case in which a California woman used Coinme to pay scammers $50,000 at a Coinstar kiosk, according to state documents and media reports.
California cryptocurrency kiosks are limited to exchanges of $1,000 a day under a 2023 law. That law came in response to a rise in scams where victims are "tricked into purchasing digital assets and transferring them directly into the scammers’ crypto wallets," according to the California department.
There has also been friction between Coinme and Coinstar.
In a 2024 lawsuit, Coinme accused Coinstar of “misusing confidential and proprietary information” from Coinme to launch a competing cryptocurrency platform, CYNQ. The case was resolved in February.
Coinstar did not respond to questions about the status of its partnership with Coinme or whether the new cease-and-desist order would affect its own operations.
In the current case, Washington state also alleges Coinme failed to disclose "material information to consumers about the time frame allowed to redeem vouchers," and also listed an inactive customer support number on the vouchers it sold.
Coinme also failed to maintain sufficient financial resources or adequate records and filed late and inaccurate reports with the Department of Financial Institutions, according to the charges.
Under the order, Coinme "must halt all types of business for customers in Washington except returning assets to customers in Washington. This includes halting new sales, sending, or receiving assets for customers in Washington."
One exception is that existing customers in Washington may continue to withdraw assets from Coinme, according to the department.
According to a Tuesday statement, Coinme "maintains it is compliant" with state requirements for financial resources and "is working with the DFI to resolve any residual concerns."
The company also said it didn't learn of the state's concerns about the vouchers until the department announced the cease-and-desist order, Enea said. State filings "mention they did an investigation, but we were never contacted as part of that process, Enea wrote.
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