Sterling Heights, other cities taking steps to minimize crypto kiosk fraud
STERLING HEIGHTS, Mich. – When people started showing up to gas stations and party stores in Sterling Heights to drop thousands of dollars into machines that looked just like ATMs, police knew something had to change.Scammers used crypto kiosks as a one-way door for other people’s money.“Kind of came up on our radar,” said Dale Dwojakowski, Sterling Heights assistant city manager. “The police started reporting large frauds and people being scammed out of a lot of money using these kiosks, and I think it caught everybody off guard about how fast these kiosks started proliferating around the state.”The latest city to actSterling Heights is the most recent city to combat crypto kiosk fraud and at least three cities in Michigan passed ordinances to regulate crypto ATMs. So far, the results show significant progress.“I believe the ordinance has done its job,” said Capt. Colleen Hopper of the Sterling Heights Police Department, who served the department for close to 29 years. “It’s definitely slowed down the amount of cases we’ve had, but it’s almost been cut in half since the same timeframe last year.”In 2025, Sterling Heights police documented more than $600,000 in crypto scam losses — and Dwojakowski believes the real figure is far higher.Here’s how much Michiganders lost in crypto fraud in 2025“When someone is defrauded or scammed out of money, oftentimes they’re embarrassed to tell family members,” he said. “So, we think that number might be well over a million dollars of people that were victimized here in Sterling Heights.”“These are life savings for some people gone in a fraction of a second,” he added.How the ordinance worksThe Sterling Heights ordinance layers multiple safeguards onto every crypto kiosk operating within city limits.Under the rules, all businesses hosting a crypto kiosk must register with the city clerk’s office. Failure to register carries a municipal civil infraction, with fines accruing for every day of non-compliance.“It’s important that we know who owns these machines, who’s in charge of these machines,” Dwojakowski said. “Because once the scam happens, someone says they were taken for five or ten thousand dollars, we need to be able to go back to that owner, the machine operator.”Machine operators are also required to provide daily transaction logs, issue receipts to users, and prominently display their license on the kiosk itself.“There’s this layer after layer of safeguards, including dollar limits for users so that they don’t end up putting in $50,000 within a couple of days,” Dwojakowski said.For first-time users, the ordinance caps deposits at $1,000 during the first 14 days.Returning users may deposit up to $10,000 within a 30-day period.“That’s when people are going to put that first batch of cash in there,” Dwojakowski said. “If they can get them to put five grand in, they can get them back the next day to put another five thousand dollars in — so, these new user limits and monthly caps are so important to safeguard people’s life savings.”Before any transaction goes through, kiosk screens are required to walk users through fraud warnings and scam alerts. The machines must also collect photo ID, a phone number and additional identifying information.As of the most recent count, Dwojakowski said between 30 to 40 businesses have submitted their registrations. Police detectives are conducting compliance checks at gas stations and other businesses known to host the machines, looking for properly displayed licenses and issuing information sheets to operators who may not yet be aware of the requirements.One woman’s close call — and a costly detourThe ordinance’s transaction limits have already stopped at least one major loss in its tracks.Hopper recalled a case where a victim attempted to deposit $70,000 into a Sterling Heights crypto kiosk — and was blocked by the ordinance’s caps.“Unfortunately, she was able to go to the city of Warren and deposit that money,” Hopper said, “and she’s out that money as of currently.”The case underscores the central frustration city leaders have voiced repeatedly: a local ordinance can only do so much.“We might have stopped the bleeding here in Sterling Heights,” Dwojakowski said, “but once the bad actors figure out that Sterling Heights has these new rules and ordinances in place, we’re just going to have them go over the border to Troy, to Warren, to Shelby Township.”The push for statewide regulationThe pattern of vulnerability is exactly why Sterling Heights took its concerns to Lansing.“For a lot of people on that panel, the technology was so new, we were almost explaining to them what the technology did and how it was used,” Dwojakowski said. “Then once we started talking about the dollar amounts and how much we saw in dollars that were being scammed from residents, I thought they were shocked.”Two bills — House Bills 5469 and 5470 — are currently moving through the Michigan Legislature and would establish statewide regulation of crypto kiosks. Dwojakowski said the patchwork of local ordinances — each slightly different — is not a sustainable solution.“We would love for there to be statewide rules governing these machines — very, very strict rules,” he said. “Because what we are seeing is the vast majority of people that use these kiosks, it’s fraudulent. It’s either for a scam or possibly it could be for drug money, illicitly gained money. You have cash, you can put it in the machine anonymously, the machine then digitizes the money.”However, supporters are also careful to distinguish the push for state regulation from an outright ban on cryptocurrency.“Cryptocurrency — it’s here. It’s here to stay,” Dwojakowski said. “To be honest with you, you’re better off buying it on a computer. We’ve seen these machines charge anywhere between 10 percent to 20 percent user fees on your money. So, if you really want to buy crypto, why would you spend 10 percent or 20 percent on a fee when you can do it at home for one percent or two percent?”Industry responds: CoinFlip weighs inNot every crypto kiosk operator is fighting the regulation. CoinFlip, one of the major operators of cryptocurrency kiosks in Michigan, says it supports commonsense rules — and has been operating in the state since 2018.“We can’t speak for the entire industry, but we take consumer protection seriously and hold ourselves to the highest standards of compliance and transparency,” the company said in a statement to Local 4. “We believe in commonsense rules and clear disclosures, and want everyone in the industry to be held to the same high standards we meet voluntarily.”The company acknowledged the scale of the problem directly.“We recognize the urgent need to address the rise of scam proliferation which is why in Michigan, we continue to advocate for smart, state-specific regulation that protects consumers from bad actors while allowing consumers to safely purchase cryptocurrency in the way that best suits them,” CoinFlip wrote.The scams fueling the crisisUnderstanding why crypto kiosks became a magnet for fraud requires understanding the scams driving victims to the machines in the first place.Hopper outlined several schemes investigators have encountered:Romance scams — A scammer builds a relationship online, then claims to need money for a plane ticket, wired through crypto.Bail scams — Victims are told a spouse or relative is in jail and needs bond money deposited into a crypto wallet.Giveaway scams — Victims are told they’ve won a prize — a car, for example — but need to pay shipping costs first. Once they pay, the demands keep coming.“The scammers are good at their job,” Hopper said. “That is their full-time job, and they’re very good at convincing and playing into the emotions and the heart — making them feel like if they don’t do it, they’re going to get in trouble or this person’s not going to get out of jail. They really play on the victim’s emotions.”And when it’s over, the money is almost certainly gone for good.“Slim to none,” Hopper said of recovery odds. “Once it’s out there, it’s out there, and it’s hard to get back. It goes into an exchange, and from there, trying to get it back is difficult. Usually the suspects are overseas, so we’re never going to get that arrest.”Virtual kidnapping: AI makes it worseLayered on top of traditional fraud is a newer, alarming scam: virtual kidnapping.Cybersecurity expert Mykolas Rambus, co-founder and CEO of Hush, said artificial intelligence has made this particular scheme far more accessible — and far more convincing — than ever before.“Most people don’t know that someone can spoof a phone number,” Rambus said. “You might think you’re getting a call from your loved one. It might look like their number, maybe their image pops up — but it’s definitely not them.”The script plays out quickly. A call comes in claiming a family member has been kidnapped. The victim hears what sounds like their loved one’s voice in the background. A ransom demand follows — often directing payment to a crypto account or kiosk.“All someone needs is a laptop, a little bit of money,” Rambus said, explaining how scammers clone voices using widely available AI tools. “You’ve seen it on Hollywood videos — the deep fakes that are out there. People do the same thing for bad intent all the time.”The raw material for those clones? Social media.“A lot of people don’t recognize what’s out there about them,” Rambus said. “On social media, usually there’s some video. Maybe they never posted it themselves, but maybe they were at a birthday party, and someone recorded a video and there’s them giving a speech. Most of us have some either images or audio or video out there about us already.”Bad actors do their homeworkThe sophistication of these operations goes beyond just voice cloning.“The bad guys not only use the technology, but they also look at calendars,” Rambus said.“They figure out where people are [going to] be — who’s vacationing, who’s on an airplane. And when you post these things, they use that to pull off these scams successfully.”Rambus recounted a close call involving someone he knows in Detroit, whose wife received a spoofed call appearing to come from her husband while he was in a meeting and unreachable. Tears, panic and chaos followed — until someone physically located him in the office.“It is elaborate,” Rambus said, “but it’s because of the information most of us put out there about ourselves. They’re also getting very good at following the playbook. Like so many people use AI tools to learn about ideas — how do I repair a car? You can do the same thing for how do I pull off a scam? And they’re doing exactly that.”And virtual kidnapping scams are frequently tied to organized crime, Rambus noted, with teams of criminals coordinating — some making calls, others physically picking up cash left in drop locations.“Almost always, it’s a crypto account,” he said.It might involve a crypto ATM, it might be increasingly these days, put it in a shoe box and leave it outside — and they’ll have people who will go get the money."How to protect yourselfBoth law enforcement and cybersecurity experts agree: the most powerful tool against these scams is preparation.Establish a safe word. Rambus and law enforcement encourage families to create a code word or phrase — something only close family members would know — that can be used to quickly confirm identity in a panic situation.“Usually, most of these AI impersonation scams, including virtual kidnapping, fall apart when someone asks a question,” Rambus said. “What they’re relying on is pressure tactics. Anytime you’re getting pressure tactics — whether it’s to withdraw money or to call or provide access — that’s when you know something’s up.”Lock down social media. Privacy settings change frequently, and platforms users abandoned years ago may still be publicly accessible.“Zombie accounts — the bad guys will use those to do their research,” Rambus said. “Not only lock them down, but if you don’t use it, just turn it off. One of the best ways you can protect yourself is just get rid of the information the bad guys are using to pull off these scams.”Think critically at the machine. Hopper urges anyone being directed to a crypto kiosk to pause and ask a simple question.“Would I have done this 10 years ago? Would I have ran to a bank, pulled out money and sent it to some random person?” she said. “If you start seeing the red flags, you’ve got to pull out — and always, always call the police department if you have a question, if you think this might be a scam.”Copyright 2026 by WDIV ClickOnDetroit - All rights reserved.
