Washington Regulators Shut Down Coinme Over $8 Million in Unredeemed Customer Funds

State Authorities Accuse Bitcoin ATM Operator of Serious Financial Violations

In a significant regulatory crackdown, Washington state officials have ordered Seattle-based Bitcoin ATM operator Coinme to cease operations immediately and begin repaying more than $8 million in customer funds. The Washington State Department of Financial Institutions (DFI) issued a temporary cease-and-desist order last Tuesday, accusing the cryptocurrency kiosk company of improperly claiming unredeemed customer vouchers as corporate income and violating multiple provisions of the state’s Uniform Money Services Act.

The regulatory action follows a detailed investigation revealing that between January 2023 and December 2024, Coinme allegedly converted $8.37 million in unredeemed customer vouchers into company revenue. According to the DFI’s filing, this included approximately $2.2 million from Washington customers by the end of 2023, with the total reaching $6.17 million from both in-state and out-of-state customers by December 2024. This practice represents a fundamental breach of financial trust, according to regulators who maintain that these funds should have either remained available to customers or been turned over to the state as abandoned property.

“The company’s voucher system operated outside the bounds of proper financial practice,” said a source familiar with the investigation who requested anonymity due to the ongoing legal proceedings. “When customers purchase cryptocurrency through a regulated money transmitter, those funds remain the customer’s property until properly redeemed or legally declared abandoned—they don’t simply convert to company profits because of an expiration date.”

How Coinme’s Voucher System Allegedly Mishandled Customer Assets

Coinme’s business model centered around a paper voucher system where customers would purchase cryptocurrency at physical kiosks but redeem their assets later through an online platform. The DFI investigation found that when customers failed to redeem these vouchers within the company’s specified timeframe, rather than maintaining these funds as customer assets or following proper escheatment procedures, Coinme allegedly reclassified the money as corporate income—a practice that was not transparently disclosed to customers or regulators.

The regulatory action details multiple additional violations dating back to 2020, including failure to maintain the required tangible net worth, keeping inconsistent records of permissible investments, and submitting both inaccurate and late annual filings to state authorities. These infractions paint a picture of systematic regulatory non-compliance that ultimately jeopardized customer funds.

Under the terms of the cease-and-desist order, Coinme must immediately stop serving Washington customers except for the purpose of returning their funds. The company must also segregate all state customer assets into individual accounts and pay restitution in the amount of either what each customer paid or the cryptocurrency’s value on the date of the order, whichever is greater. The company has been given 20 days from the service of the order to request an adjudicative hearing, after which the temporary cease-and-desist will automatically become permanent.

Potential License Revocation and Personal Sanctions Against Leadership

The regulatory action extends beyond operational restrictions, with the DFI clearly stating its intention to revoke Coinme’s money transmitter license entirely. The company also faces a substantial financial penalty of $300,000 plus a $375 investigation fee. Perhaps most notably, the charges specifically target Neil Bergquist, co-founder and CEO of Coinme, seeking to prohibit both him and the company from participation in any money transmitter business for a decade.

“This type of enforcement action against both a company and its leadership signals the seriousness with which regulators view these alleged violations,” explained financial regulatory expert Patricia Harrington, who has no direct involvement with the case. “When personal sanctions are pursued against executives, it typically indicates that authorities believe the issues stem from leadership decisions rather than isolated operational errors.”

The severity of these potential penalties reflects growing regulatory scrutiny across the cryptocurrency sector, particularly for businesses that serve as on-ramps for retail customers entering the digital asset space. When reached for comment, Coinme representatives did not provide an immediate response to the allegations or information about how affected customers should proceed to recover their funds.

Broader Pattern of Cryptocurrency Kiosk Enforcement Actions

The action against Coinme represents part of a broader pattern of increased regulatory oversight of cryptocurrency kiosk operators across multiple states. Daniel Liu, CEO of Republic Technologies, told Decrypt that Coinme’s situation appears to stem from “operational mismanagement rather than loss or theft of customer funds.” He noted that while treating unredeemed vouchers similar to unused gift cards “is not inherently unreasonable,” the execution “clearly fell short.”

“The phase-out of the product introduced preventable issues, including what seems to have been a dysfunctional customer-support pipeline,” Liu elaborated. “Those are responsibilities the company has to own.”

This enforcement action follows similar regulatory interventions in other states. Just last month, California’s Department of Financial Protection and Innovation fined Bitcoin ATM operator Coinhub $675,000 for overcharging customers, with $105,000 designated specifically as restitution for consumers who paid excessive fees. The same California regulator had previously imposed a $300,000 fine on Coinme itself in June for charging excessive markup fees, accepting cash transactions above the state’s $1,000 daily limit, and omitting required information on transaction receipts, with $51,700 of that amount earmarked for customer restitution.

Implications for Cryptocurrency Access and Consumer Protection

The cascade of enforcement actions against cryptocurrency kiosk operators highlights the growing tension between expanding access to digital assets and ensuring adequate consumer protections. Bitcoin ATMs have proliferated across the United States in recent years, offering consumers without traditional banking relationships or technical expertise a straightforward way to purchase cryptocurrency. However, these same accessibility features can create vulnerability when operators fail to maintain proper compliance standards.

“Physical cryptocurrency access points serve a crucial role in democratizing digital asset ownership,” commented Sophia Rodriguez, a cryptocurrency inclusion advocate unaffiliated with any of the companies involved. “But that accessibility comes with heightened responsibility. When these services mishandle customer funds or engage in deceptive practices, they disproportionately harm the very populations they purport to serve—often those already underserved by traditional financial institutions.”

For affected Coinme customers in Washington state, the immediate concern centers on recovering their funds. While the regulatory order provides a framework for restitution, the practical process of identifying and compensating customers who purchased vouchers months or years ago may prove challenging. The situation underscores the importance of maintaining comprehensive transaction records when using cryptocurrency services and highlights why regulatory oversight remains essential even as the industry pushes for greater autonomy.

As cryptocurrency adoption continues to expand into mainstream financial services, this case serves as a stark reminder that the fundamental principles of financial stewardship—transparency, proper accounting, and segregation of customer assets—remain non-negotiable, regardless of whether the underlying technology is traditional or digital.