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GROSSE POINTE FARMS — Scammers are finding newer and more sophisticated ways to con people out of their money, and scams involving cryptocurrency are becoming more common — and extremely difficult for law enforcement to crack.
Frustrated by seeing their own residents fall prey to these scams, Grosse Pointe Farms officials find themselves on the cutting edge in Michigan by enacting what is believed to be the first ordinance involving virtual currency ATMs. The Farms City Council voted unanimously in favor of the ordinance at a meeting July 14.
The ordinance — which applies to any virtual currency machines that might be placed in the Farms — prevents transactions of greater than $1,000 within the first 24 hours for a new user and caps the total amount of a transaction to $5,000 over a 14-day period for a new user. Also for a new user, if the transaction is in excess of $500, there must be verbal confirmation of the transaction with the customer via a live phone or video call between the customer and a real person who works for or with the virtual currency machine operator.
In addition, any virtual currency machine in the Farms must be registered with the Public Safety Department and the operator must obtain a business license from the city. As drafted by City Attorney William Burgess, the ordinance mandates that there must be written consumer warnings on the ATM letting consumers know about the risks of making a cryptocurrency transaction and any fees associated with such transaction, and there must be a notice on the machine with the phone number of a live person who can be contacted by a user of the machine.
City Councilman Joe Ricci said the waiting period was a critical aspect of the Farms ordinance, as it could give victims of scams time to realize they were being duped. Con artists usually give victims the sense that immediate payment is urgent, so they don’t have a chance to research or question the scenario with which they’re presented.
“The meat and potatoes of this ordinance is the waiting period and the dollar limitation,” Ricci said.
Approval of the ordinance doesn’t block any business or other facility from installing a cryptocurrency machine in the Farms. There are currently no virtual currency ATMs in the Farms or the other Pointes, although there are some in nearby St. Clair Shores.
“It doesn’t outlaw or ban placement of virtual currency machines in the jurisdiction of Grosse Pointe Farms,” Burgess said of the city’s ordinance. “It’s restricted to devices that … might be placed in Grosse Pointe Farms.”
City Councilman Lev Wood spearheaded the ordinance after learning about a Farms resident who was scammed.
“The crooks tell people to put money into these ATMs,” Wood said. “We want to enhance transparency and provide a little help to our residents.”
Mayor Pro Tem Beth Konrad-Wilberding — who was serving in the absence of Mayor Louis Theros — said Wood and City Councilwoman Sierra Donaven “both worked very hard on this” initiative.
Konrad-Wilberding, who is active with the Michigan Municipal League, said that as of press time, there were no similar ordinances on the books or pending in other communities in Michigan.
“There is nothing on the radar for any municipalities to bring (an ordinance) forward,” Konrad-Wilberding said. “We would be the first (in Michigan).”
Burgess said state or federal legislation regarding cryptocurrency ATMs could be approved in the future, and those would likely supersede the Farms’ ordinance.
“We would most likely welcome legislation at the state or federal level,” Burgess said. “You don’t want to have patchwork legislation (among communities).”
City Councilman John Gillooly was among those who voiced support for the ordinance.
“I am very pleased the city of Grosse Pointe Farms is taking up this (issue),” Gillooly said. “This ordinance protects everyone who wants to use one of those machines in our city …. We have a very well-written ordinance that I think is going to be a model for municipalities across the state and country.”
City Councilman Neil Sroka agreed, saying he hoped the Farms would share the ordinance with other communities. He said passage of the Farms ordinance could also spur action in Lansing.
Wood said he shared the draft ordinance with some other mayors in the Pointes already. He said they need to get other communities — like St. Clair Shores, where the Farms victim went — to pass ordinances like this to protect future victims from crooks.
Carson P. Gatt, a government policy adviser with the Lansing office of the law firm Dykema, spoke on behalf of his client, Chicago-based global digital currency platform CoinFlip. He said CoinFlip was in favor of virtual currency regulation — and was actually working with leaders at the state and national level on that — but the company was concerned about the low maximum transaction the Farms wanted to impose on first-time users.
“If you have an experienced person who might have been on a different (virtual currency) platform, you’re disincentivizing them” from using a machine in the Farms, Gatt said.
“CoinFlip is committed to pursuing reasonable regulation at the state level,” Gatt said.
Wood responded that while CoinFlip might be a responsible company, the two virtual currency machines he had seen in the immediate area lacked visible warning signs and some of the other pieces of information the Farms was mandating be featured on these machines.
In addition, Farms officials said they felt the low maximum amount for a new user, along with the waiting period, would protect people who might fall prey to scammers.
Retired Farms Public Safety Director Daniel Jensen, a Farms resident, praised the city for adopting this ordinance, and said that the rise of artificial intelligence is only going to worsen online and phone scams.
“This is a great example of good police work being proactive, not reactive,” Jensen said.
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