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Bitcoin Depot went from a $600m, publicly-traded business to bankrupt in a matter of months, but the story around the company and other crypto ATM providers has been brewing for years. We happen to have just the guy on staff to break it all down.
In this episode of Cloud 9fin, head of bankruptcy Cat Corey talks with senior LevFin reporter Dan Mika about his previous reporting on the crypto ATM industry’s history of targeting neighborhoods of color, and how it has become a favorite tool for organized scam groups to separate victims from their cash. The two also talk about what value is left for creditors in a business model where — in the eyes of lawmakers — the societal harm is too great to ignore.
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Dan Mika
Hello, and welcome to another episode of Cloud 9fin and the In-court Report. I'm Dan Mika. I'm a senior leveraged finance reporter here at 9fin.
Cat Corey
And I am Cat Corey. I am the head of bankruptcy here at 9fin.
Dan Mika
I am taking a little step away from my usual day-to-day job on the primary and the syndications desk to talk about a small mid-market bankruptcy that I happen to know a lot about from quite a bit of my time before 9fin. Cat, let's get into it. Let's talk about Bitcoin Depot and their bankruptcy. They filed a couple weeks ago.
Cat Corey
Yeah, certainly. So their filing, actually, they note during the first day hearing that it came as a surprise to many of their key stakeholders, employees, stockholders, and contract counterparties. They filed for Chapter 11 on May 18th in the Southern District of Texas before Judge Christopher Lopez. And their first day hearing was on May 19th. Counsel to the debtors is Vinson & Elkins and they laid out the company's situation in depth at the first day hearing. They entered chapter 11 with just a little over 15 million in funded liabilities with over 13 of that attributed to Silverview Credit Partners.
But at the center of the case, it's not the funded liabilities that have caused these issues. At the center is their network of Bitcoin ATM kiosks that they operate. So the company says that they have the largest Bitcoin ATM network in the United States. And customers use these kiosks to convert cash into Bitcoin, with Bitcoin Depot earning revenue through transaction fees and a markup on the Bitcoin it purchases to complete those transactions.
While the company does have other business lines, those kiosks generated 99.8% of the company's revenue. The company was founded in 2016, and they have ATMs in grocery stores, convenience stores, other retail locations in the US and in Canada. In 2023, in June, they completed a dSPAC. So they are publicly listed on NASDAQ. In addition to the ATM business, they do operate some other businesses, BDCheckout, which allowed customers to convert cash into Bitcoin through a cashier at a grocery store or a similar venue. They also own BitAccess software, which enables Bitcoin ATMs to process the transactions.
Importantly, the company notes that they do not mine Bitcoin and they do not hold the Bitcoin in custody, which if you remember from earlier Chapter 11 crypto cases, there was a big fight about who was actually the owner of Bitcoin that was in custody. Instead, Bitcoin Depot just purchases the Bitcoin on a just-in-time basis to facilitate their customer transactions. They also own something called Kutt, Inc., which is a peer-to-peer social betting platform, and ReadyBucks, which is an online platform that offers business advances to small businesses.
So the roots of this chapter 11, since it's not tied to their funded indebtedness, is tied to increasing scrutiny over some fraud that's been conducted through their Bitcoin kiosks. According to the company, outside parties, aka scammers, were targeting vulnerable individuals and convincing them that they faced an imminent threat and directing them to deposit money into Bitcoin Depot kiosks. Rather than sending those funds to their own digital wallets, the victims would instead send the money directly to the wallets controlled by the scammers.
Beginning in 2024, Bitcoin Depot faced mounting obstacles. The company became a subject of lawsuits and investigations by 11 state agencies, as well as an SEC information request and an FTC investigation. And all of those are related to concerns about those scammers. There was also various civil lawsuits, including an $18.5 million arbitration award in favor of CashCloud, which was just a breach of contract claim.
So in response, Bitcoin Depot stated that they implemented enhanced compliance standards in October of 2025, which included verification measures that were designed to prevent scammers and their victims from using the kiosks. They also implemented a know your customer verification process. But those measures actually came at a cost to the company and ultimately led to the Chapter 11 filing. Following the implementation of the new standards, revenue declined and continued to fall into the first quarter of 2026.
So by the time they filed its Form 10-K in March, they disclosed that revenue from its core ATM businesses was expected to decline between 30% and 40% year over year in 2026. At that same time, states and localities began adopting statutes that limited Bitcoin kiosk operations. So combining those two together was kind of the death knell for the company. The company said it did try to work through whether it could implement compliance measures that would both sufficiently guard against fraud and maintain a viable goal forward business. And through that discussion, the conclusion was no, that it could not.
As a result, they took all the kiosks offline as of the petition date and they've entered chapter 11. The case so far has been not too exciting. There's not any crazy fireworks. They've indicated that they want confirmation of a liquidating plan within 45 to 60 days of the filing and that the primary objective of the cases is to pursue a value-maximizing sale process, monetize the state assets and distribute the net sale proceeds. So liquidity is obviously limited because they generated revenue from kiosks that are no longer operating. But they did say that because they have a very specialized nature of assets, the universe of potential buyers is pretty limited and easy to identify. So they filed a bidding procedures motion, which is gonna be heard on the 3rd of June at 10:15 am to consider that process. And then they have a second day hearing scheduled for June 9th. They're looking to have the sale hearing for July 2nd for their assets. That's where the case stands.
Dan Mika
And because this is a public company, we do know how big this company was in terms of what they were turning over. In 2025, they generated just about $615 million in revenue. Their EBITDA margin was 9.2%. Year over year, they grew 7%. So this isn't, even though the amount of debt that's at play in this bankruptcy is relatively small, this did seem to, I wouldn't say necessarily came out of nowhere with the amount of mounting regulatory pressure, but it is a fairly large sized business that has has kind of come down down to a liquidation quite quickly.
And the reason why this caught my eye when I came across the bankruptcy alert is that I covered this company and a lot of Bitcoin ATM companies prior to coming to 9Fin. And the story is interesting to me because I think to me it tells the story of an emerging business idea that came in between these three periods of cryptocurrency. It didn't come during the time of cryptocurrency when it was just the almost like a hobby. It was like very tech oriented. It wasn't really mainstream. Not a lot of people knew what cryptocurrency was or knew what Bitcoin was. It was coming just as in 2016, it was starting to really pick up mainstream. It was starting to get more credibility as potentially something that could be used in everyday transactions. And that's where it came in.
And then right now it's suffering through the new period where I think cryptocurrency and Bitcoin in particular is treated more like a speculative asset versus a currency. And like you mentioned, there is a lot of concern around how these ATMs are used and what they're primarily used for in real life versus what the company says that they're being used for.
But the first story I wrote on this was when I was finishing up my master's degree at the University of Missouri, and I had a tip from someone in Kansas City saying that they had traveled all along Troost Avenue, which is the traditional red line of Kansas City that separated the historically underfunded and poor parts of Eastern Kansas City from the more developed, more wealthy West side of Kansas City. Troost Avenue was that traditional red line that had been in effect for much of the city's history. And the source told me, if you were to go along Troost Avenue, you would notice these crypto ATMs popping up. And you would also notice that the fees that they charge were very, very high. So I built a data set and overlaid it with census data. One of the interesting things that I found is that if you were to overlay it, you would see that these crypto ATMs were being placed more often than not in neighborhoods that were majority black, majority Latino in the Kansas City metro and overlaid very well with areas that had lower median incomes based on census data at the time.
At the same time, the fees that these machines were charging changed a lot. Bitcoin Depot is the larger one, the largest ATM provider. And there are many others that are still in existence that are still operating. But on average, I saw that the fee was about, on average, 10% of the transaction fee. So whatever amount of USD that you were transferring into Bitcoin, you cut off usually around 10%. In one case I found personally, because I did put $20 in to check this myself, I was charged a markup of 40% to transfer Bitcoin into USD. And then usually throwing a $1 to $5 flat fee for processing, which feels more like a little knife twist than anything else.
And many of these machines were one-way only. About 20% of the machines that I looked at in the city were one-way only. So you can put cash in, but unlike regular ATMs, you can't take cash out. So that was the first story I wrote. And I'm sure you can recreate that all across the US, right? The placement of these machines were, you were not seeing these in the most wealthy parts of major metros.
Cat Corey
Dan, I have to ask though, do you still own the Bitcoin you bought with the 20 bucks?
Dan Mika
I forgot where the wallet is. So the interesting thing about this is that you can create wallets at these machines. When I had them scan my driver's license, which, you know, I guess that's a form of know your customer, which they were trying to implement. But I didn't feel great about doing that. And then they spit out a receipt with a QR code and they say very clearly, do not lose this receipt. Otherwise, you will lose all of your money. And there is no way for you to get reimbursed. There is no way for us to get the wallet back to you. And then they spit out a separate receipt that says the keys. I'm sure somewhere in my notes, I might be able to pull up the wallet and see how much value is still in there. I'm sure that's just kind of lost to the ether right now. Pun not intended.
Cat Corey
So it could be worth a lot of money, you never know. Or you could be a creditor of the bankruptcy estate.
Dan Mika
I could have 0.0001% of this company.
But that was also an interesting thing, right? Because the other argument that Bitcoin Depot had made in public statements is that they were trying to act as an alternative form of financial safekeeping for people that did not have access to banks, whether or not it's because they didn't have an FDIC insured institution nearby, or if they had a criminal record, which precluded them from being able to access a bank account, or a bank would just deny them the ability to open up a checking account.
But it also came with those risks, right? All that funding that they deposited in came at, I mean, I would say like, if anyone said like, you know, in order to get your paycheck every week or every two weeks you had to pay 10% of your wages, I would be up in arms. If you had to pay up to 40% and you didn't know that you were paying 40%, you would also be up in arms.
To that point, the way I saw a lot of these machines operate is that they simply quoted the 10% to 40% markup at what they said was the price of Bitcoin at the time of the transaction. But you can always just look it up on, you could also have just Googled $BTC and seen that price. So that price discrepancy was not disclosed. And that's one way where value could have been leaked out and going towards the company in terms of transaction fees, in terms of conversion fees.
Cat Corey
So it's kind of akin to like the payday loans, right? Which you know are known to be part of the the lower income neighborhoods right? Where people need cash fast and they get charged these absorbent you know interest fees in order to get the money you know quickly from their check and then they have to repay it on the back end and so ultimately it costs much more than it's actually worth. But again you know these customers they don't have bank accounts the same problem, right? But, you know, these things that target the low income neighborhoods that are just not financially friendly in the least.
Dan Mika
Right. And the industry folks I talked to for that specific story said that there was no correlation and they pushed back on the notion that they are acting in terms of in trying to take advantage of people without access to the traditional financial system. I also spoke to people who said that this is very clearly a form of financial exploitation. So that was the first story.
The second story was when, again, when I was finishing up my master's degree, I was briefly working for the Organized Crime and Corruption Reporting Project. And we took a much larger look at the aspect of the scammers, of the fraud that was occurring through these machines. It's a very common story, right? You get a call from an unrecognized number or a text number saying, someone that you know has been arrested and they need to post bail or you have an outstanding bill that you have to pay immediately. Call this number and you're connected to someone who is saying, you know, you're gonna be arrested, your house is gonna be foreclosed, you're gonna lose your power. And the only way to pay you right now is to go buy a bunch of gift cards.
In this case, it was, and we spoke with someone who's a 60-year-old family member had been victim to this. They guided her to go to the bank, withdraw about $8,000 worth of cash, and take it to a crypto ATM. And guided her through creating a wallet, inserting the cash in. And that money was eventually moved to multiple different wallets, put together into what investigators would call a blended wallet, which is multiple wallets routing money altogether, being mixed up so you can't exactly identify your specific $8,000 or where that money came from, and then moved on eventually to a wallet that was spending money with a Curaçao-based online betting platform. She lost that money. That was just gone.
And what we found is that these machines, although the markup is high, at volume, scammers, organized scamming groups were using this to collect millions, hundreds of millions of dollars from Americans in the same way that you would get scam calls saying you need to provide gift cards to us in order to prevent someone from being arrested or from your house from being foreclosed on.
Cat Corey
It's super interesting. And actually, I had a family member that lost a decent amount of money through a crypto scam like that, like this. And I remember like, you know, they went from having discussions with me about, you know, tax implications of all this money to it being just gone one day and couldn't trace where it went. So I definitely I feel the human nature side of that story.
Dan Mika
Right. And the FBI has tried to collect some information on this, although it was fairly nascent in 2023, 2024, when I was reporting on this last. In 2023, they had about $120 million of crypto ATM related losses reported to them.
In 2025 out of the latest report from them, they said that they had $389 million worth of reported losses involving crypto ATMs. And about $257 million of that were from victims ages 60 and up.
And that number is probably a significant undercount due to the fact that not a lot of people know that you have to report this to the FBI, that local authorities might not be reporting it to the FBI, maybe even just like the shame that someone might feel about reporting that they had gotten caught up in a scam, right? So the actual number is quite low based on what we understand.
So this is, again, this is a really interesting bankruptcy case in that this business was launched and created with this certain kind of ideal around creating Bitcoin and making it more accessible to the masses. In particular, making it so you can turn cash into Bitcoin rather than having to give it to the bank and then having the bank send money to a crypto exchange that's all online and has much cheaper conversion fees, by the way. But turned into something much different and turned into a business that had so much regulatory scrutiny on it that it's now in liquidation.
Cat Corey
Yeah, I think it's super interesting. You wonder, is the Bitcoin Depot, is it a viable business idea that just got too complicated because of the complicated nature of crypto? Or is it just really not, can't withstand actual regulation? You know what I mean? Without all the need to regulate it so heavily, could it survive otherwise?
Dan Mika
That's a really interesting question, right? I think in part that when you have this mixture of a generally pretty regulated entity, right? Many transbangers are pretty heavily regulated and you're matching it up against cryptocurrency, which at its roots doesn't believe in regulation, doesn't believe in government oversight. You're bound to have conflicts like that. And I can't speak for anyone who's launched a crypto ATM company back in 2016 as to whether or not they believe that we were right on the precipice of the dollar becoming an artifact of history and everyone would be trading using 0.0001% of a Bitcoin to buy their Starbucks.
But, I think the reality is like it was a business model that perhaps did not realize that it could have been used for nefarious purposes. Like, for example, if a scam like this happens on Venmo, it would have been like Venmo and like other payment processes like that were more focused on trying to prevent that. I think of the front end because they were initially so regulated. Whereas you know even though this was a company that was generating a couple hundred million dollars in transaction revenue i think the initial goal was not how do we transfer money safely the the engineering problem of how do we turn cash into bitcoin in a matter of minutes was the main goal and now that comes in with a new so now that business model was around and was viable and was generating good margins until these past couple of years where the groundswell of people saying we've lost thousands of dollars individually and now hundreds of millions of dollars as a nation that we know of to these scams, that is a big change that has, I think, put the final death knell for this company.
Whether or not this company and others like it would survive if there was no regulation and if there were no attempts by local authorities to try and clamp down on using these machines as a way to as a conduit for fraud remains to be seen although as of last year they were growing, right? They were generating more revenue
Cat Corey
Do you think you know since they're trying to do a sale process, right? These assets, the majority of the assets are these, these ATM kiosks. Like, do you think, I mean, I know you're not, you know, an investment banker, but are there, do you think there are purchasers out there? Like, do you think these are viable assets that like people are going to really want to buy? Like maybe one of the competing companies knowing the regulatory challenges that are going to come with operating this large of a business?
Dan Mika
That's a great question. When I was writing that story in Kansas City, I also ran into a store owner whose machine had been plugged in, but had been blinking "no connection" for a while. And I asked him what happened. And he said the company went bankrupt and no one's come by to pick up this machine. This wasn't Bitcoin Depot. This was a smaller player. I'm not sure where that machine is now. So I think if the biggest and I guess the financially strongest one of these companies that we know of has been given the death knell by regulation, then I wouldn't imagine that much of the smaller players would be able to have the liquidity around to compete and to buy up these assets on the cheap, the assets being these ATMs.
Now, it is possible that someone could bid for these ATMs, depending on the models underneath, right? These look like almost like arcade games, right? Like they have big blocky covering that's usually in yellow or orange or the company colors. It looks like, you know, you could put in a couple of coins in there and play Tetris on it. But underneath, they are ultimately ATMs. So it's possible that these machines could be flashed and be bought up by someone who's running a normal ATM business and just use those assets as expansion for just running your normal corner store ATM that connects to your bank account, connects to the SWIFT system, allows you to exchange fiat for fiat dollars. That might be one way that these assets could be used.
I mean, ultimately, they are computers, right? And there's chips in them and there's parts in them. That could be repurposed for something else. But at this point, I really doubt that anyone else could look at Bitcoin Depot's situation and read the Day One hearing transcripts where they said that the debtor cannot figure out how to create a profitable and viable business model going forward with the amount of regulation that's out there right now and say, I can work around these regulations and turn it around using these assets.
Cat Corey
I totally agree with you on that. I think it'll be interesting to track the sale process. Bids are due the 24th of June, or at least that's what they're asking for in their bid pros. So it said it'll be a quick process. See if maybe the smaller companies would buy smaller groups of assets instead of all of it at once, a couple of ATMs here or there.
But it kind of reminds me of the Chicken Soup for the Soul bankruptcy, the owner of Redbox, the movie vending machines. And so many of those were just abandoned because no one obviously wanted to buy it because no one watches DVDs anymore. And I remember there were so many pleadings and people appearing in court asking what they could do and if they could remove the vending machines from out of the grocery stores because no one was coming to take care of them anymore and they didn't want it since it was a closed business. So it's a common problem with respect to those type of assets when a company liquidates. So what do we do with them now?
Dan Mika
And are those vending machines, are they like put away in like a big warehouse like at the end of the Indiana Jones movie?
Cat Corey
No think one of the landlords said he really wanted to like pull it out from the wall and beat it with a sledgehammer So I think it's like the the movie we all love with the printer at the end, you know?
Dan Mika
Office Space, yeah.
Cat Corey
Yeah, it’s like one of those situations, I think, for those those grocery store owners.
Dan Mika
Yeah it's definitely gonna be an interesting one to watch and just see what value it all can be generated out of these assets. And looking at their last annual report, this is their main asset. They were pretty heavy in cash. They only had about $10 million or so of crypto on hand. They were mainly engaging with third-party counterparties to do the transaction.
But the majority of their hard assets here, the majority of what's left for the debtors, or the, you know, the lenders is going to be whatever value you can get of these machines. So now you have something that's been essentially regulated out of existence, I would say.
Cat Corey
And maybe rightfully so when you look at it, in my opinion.
Dan Mika
Rightfully so. And reporter hat aside, you know, I think, you know, the business model is really difficult to defend, both from an economic standpoint, but definitely from a regulatory standpoint. And I don't think anyone has created a very elegant solution to, or even could create a very elegant solution to preventing crypto ATM fraud because it is so emotionally driven, right? And it does rely on tricking people, on creating fraud and creating very high pressure situations that primarily, again, target people 60 and up.
I'm trying not to be ageist here, but if there's any group of people who would not really understand how cryptocurrency works and perhaps not fully understand the differences of a crypto ATM to a traditional bank account or traditional payment system, it would be someone who is 60 and up, who is not focused in on any of this stuff and may have passed cryptocurrency ATMs in a corner store or a gas station somewhere and just have never noticed it. So again, that does bring up a question of just like, what value is there left for any of the creditors out of these machines? And I think that'll be where we're going. We'll, see how it turns out.
Cat Corey
I find it super interesting that you covered this company, you know, what, 10 years ago. How long did you write the articles? Did I just make up a date? I did.
Dan Mika
You absolutely did. The company was formed 10 years ago. It was 2023, 2024 is when I was really focused on this.
Cat Corey
But still, you identified these issues three years ago. And I feel like I should dig through your notes and see what other companies you were investigating so we could track for future bankruptcies coming up.
Dan Mika
I'll definitely dig through my notes.
Cat Corey
Yeah, let me know.
Dan Mika
Well, this is one that we'll keep an eye on and I'll take a look through my notes and continue to track this company and other trouble companies alongside my day job of tracking syndications. Well, this has been a great conversation, Cat. Thanks for calling in. Always great to chat with you.
Cat Corey
Yeah, definitely, Dan. Thanks for your time today.
Dan Mika
And thank you, dear listener, for tuning into this episode of Cloud 9fin. If you have any questions, comments, you can reach me directly at dan.mika@9fin.com. You can also reach us at podcast@9fin.com.
If you're interested in reading my stories or any academic research that came out of my stories, check the show notes. We'll have links for you down there. Have a great rest of your day and we'll talk to you soon.