Iowa Supreme Court Reverses District Court Ruling, Awards Seized Cash to Bitcoin Depot
On Friday, May 16, 2025, the Supreme Court of Iowa reversed a district court decision in the case of Bitcoin Depot Operating, LLC v. Carlson, ordering that $14,100 in seized cash be returned to Bitcoin Depot Operating, LLC, rather than to Carrie Carlson, the individual who deposited the funds into a Bitcoin ATM. The court remanded the case with instructions to return the funds to Bitcoin Depot, concluding that the company had a greater right to possession of the money.
The case stemmed from an incident on February 9, 2024, when Carrie Carlson withdrew $14,100 in cash from her personal bank accounts and deposited it into a Bitcoin ATM owned by Bitcoin Depot at an Amoco gas station in Cedar Rapids. In exchange, Bitcoin Depot transferred 0.22960970 Bitcoins to a digital wallet specified by Carlson.
Carlson later reported to the Linn County Sheriff’s Office that she had been defrauded by an individual claiming to be from the “Geek Squad,” who instructed her to purchase Bitcoins and transfer them to a specified wallet to protect her accounts from being compromised. The Sheriff’s Office executed a search warrant on February 12, 2024, seizing the $14,100 in cash from the ATM as part of a fraud investigation, as the machine had not been emptied since Carlson’s transaction.
Following the investigation, Bitcoin Depot filed an application on February 21, 2024, under Iowa Code section 809.5, seeking the return of the seized funds, which were no longer needed for investigative purposes. Carlson, on March 18, 2024, filed a motion to intervene and submitted a competing claim for the return of the funds. The district court held a hearing on March 21, 2024, and on April 30, 2024, ordered the Sheriff’s Office to return the $14,100 to Carlson. Bitcoin Depot appealed the decision, and the Iowa Supreme Court retained the appeal for review.
In its ruling, the Supreme Court conducted a de novo review, determining that Bitcoin Depot had the greater right to the seized funds. The court found that Carlson failed to prove that Bitcoin Depot had reason to know she was under duress when she deposited the cash. The transaction required Carlson to confirm that the Bitcoin wallet receiving the funds was her own, as per Bitcoin Depot’s terms and conditions. A warning on the ATM screen cautioned users against transferring Bitcoins to third-party wallets and advised that such transactions could be scams. Carlson acknowledged these terms but directed the Bitcoins to a wallet that was not hers, as instructed by the alleged scammer.
The court rejected the district court’s analogy comparing the case to recovering stolen property from a pawnbroker, noting that Bitcoin Depot is not a pawnbroker and that the cash deposited by Carlson was not stolen property. Instead, Carlson voluntarily deposited her own money into the ATM, and Bitcoin Depot fulfilled its part of the contract by transferring the Bitcoins.
The court also dismissed the district court’s characterization of the transaction as a “smart contract,” stating that established contract law applied. Under the Restatement (Second) of Contracts section 175(2), a contract induced by third-party duress is voidable only if the other party had reason to know of the duress and did not act in good faith. The court found that Bitcoin Depot acted in good faith, transferring Bitcoins from its inventory without specific knowledge of Carlson’s situation.
The Supreme Court concluded that Bitcoin Depot’s general awareness of potential scams, as reflected in its ATM warning, did not constitute knowledge of Carlson’s specific duress. The court emphasized that holding otherwise would render every Bitcoin ATM transaction potentially voidable, undermining the validity of such contracts.
The decision reversed the district court’s order and directed the return of the $14,100 to Bitcoin Depot.
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