
The Great Robocoin Rip-off: How We Lost $25,000 Buying a Robocoin ATM - metalab
https://docs.google.com/a/metalabdesign.com/document/d/1aL_b_Eq6WKv_u_ZKiPNPBXz5UbuMhi2Xm1AjdsgVER4/pub
======
nikcub
If you're wondering how you should do these types of transactions without
putting cash up front, the field is called trade finance.

Call your bank - most of them have a trade finance desk, or Google the term. A
slightly cheaper way of doing it is to have a lawyer draft a terms of trade or
supply agreement with either the funds in escrow with the firm or a bank
guarantee.

Having your bank finance the trade is worthwhile as interest rates are so low
at the moment. Common terms are 60, 90 or 120 day delivery with FED/LIBOR + x%
(where x is the risk profile of your business - shop around to get prices)
cost over the term.

The agreement would contain delivery timetables, warranties, customs
clearance, liabilities, indemnities, guarantees, who pays what, etc. and you
are protected legally without handing over tens of thousands of dollars or
more upfront. These contracts are protected by law in almost all
jurisdictions.

You don't finalize the transaction and pay for it until all conditions have
been met and you have the goods in hand and have verified. The seller is
trusting an international bank or a law firm escrow, and they should also have
a lawyer or bank on their end (a trusted seller can receive the cash upfront
for a fee with the bank picking up the risk, although I doubt any bank would
finance a bitcoin atm without verified trade volume and a lower risk profile).

Talk to your lawyer and talk to your bank, having expensive items delivered
without risking the full cost is a solved problem as old as finance itself and
trillions of dollars annually are traded in this way. The extra $1k or so
you'd pay on a $25k deal are worth it for the guarantee. If you ship goods
regularly the costs are amortized as you can use the same contracts and
finance suppliers. Don't deal with anybody shipping $20k+ valued products that
doesn't deal with a bank trade finance desk or law firm and is instead asking
for a bank transfer.

This is how most high cost goods are traded - from oil and other commodity
supply contracts through to companies like Boeing and Airbus supplying planes,
or GE supplying turbines for a power plant. Most people without experience
lead into it thinking that buying something that costs $25k, $100k or millions
of dollars is just the same as purchasing something at your local store just
with bigger numbers. It isn't.

Bitcoin multisig transactions, or m of n transactions are also worth
investigating as they cut the costs - although there is currently a lack of
escrow/intermediaries who are as trusted as major law firms or an
international bank. There is a huge opportunity in cutting the costs and fees
associated with trade finance with bitcoin.

~~~
marklittlewood
Like a bank is going to offer trade finance on this?!? Seriously. That should
be clue enough.

~~~
nikcub
Not sure what gives you an impression that there is some minimum amount for a
trade finance deal. Bank guarantees are a form of trade finance, and you have
other simple instruments. A google search brings up 2 or 3 providers who would
do an online quote for amounts starting at $10k.

Structured trade finance is a whole other matter, that is where you have
bespoke instruments and teams working on deals - usually with businesses that
see $50M+ p.a in deal flow.

In either case I mentioned in my post that having a lawyer do a terms of trade
or supply agreement is cheaper at the low end.

~~~
tyang
Maybe Mark meant a bank one would have heard of? :)

------
Animats
The fraud level in the Bitcoin world is so high that it makes South Florida
look good.

There's a working Robocoin ATM at Hacker Dojo in Mountain View, CA. Nobody
uses it. Nor should they. 15% bid/ask spread, 5% fee.

Incidentally, the retail price for an ordinary ATM machine is $2,000 to
$4,500, depending on the features ordered. A standard through-the-wall bank
ATM is about $9,500. Even if you order every option from cash deposit through
biometrics, they don't cost $25,000.

~~~
icebraining
Ordinary ATMs have economies of scale not available to Bitcoin ATMs, from
simply making bigger purchases to distributing fixed costs (like software
development). It's also a much safer business - you can be relatively sure the
dollar economy won't crash tomorrow and kill your business.

~~~
scott_karana
I'm not sure about this. Since Bitcoin ATMs still dispense cash, why not just
retrofit the same hardware?

Hell, why aren't people paying the smaller ATM companies to make custom ones?
It's not like banks don't already get custom-shaped ATMs made for them.

~~~
icebraining
_Since Bitcoin ATMs still dispense cash, why not just retrofit the same
hardware?_

You can use the same hardware, but when you're buying 10s instead of 1000s of
them, it'll probably cost you a lot more per unit. At least that's how it
works for most manufactured goods.

~~~
scott_karana
For sure. But a 400% difference is not usual for bulk purchases.

------
aleem
Jordan Kelley has posted his response on Reddit
[http://www.reddit.com/r/Bitcoin/comments/2jakg4/the_great_ro...](http://www.reddit.com/r/Bitcoin/comments/2jakg4/the_great_robocoin_ripoff_how_we_lost_25000/cl9yw80)

Judging from the replies, it seems to have backfired probably because he did
not acknowledge the errors on his side (shipping a lemon, unresponsive over
email and not having provided a refund yet).

Worse, he doesn't seem to realise that the name-and-shame was a result of his
and ultimately RoboCoin's actions.

Edit: The correct response would have been to issue a refund immediately,
acknowledge and apologise for the issue, highlight the trouble area (upstream
supplier issues or whatever lead to this), and commit to solving or already
having solved this problem for future clients + internal review of this
mishap.

~~~
DanBC
Reddit threads sometimes provide nice extra context but the armchair lawyering
from angsty 22 yeAr olds is unfun.

~~~
spacemanmatt
Damnit, you just made me miss Groklaw again.

------
sgentle
"Just so we're perfectly aligned, I want you to understand the relationship
that Robocoin has with our manufacturer. We are actually just a reseller of
their kiosks with our software."

I've heard this from smaller retailers of all kinds of products and, as
pointed out in Andrew's reply, it's complete bullshit. The company that took
your money is the company you formed a contract with. Any nonsense about
"yeah, but the manufacturer..." is a smokescreen designed to dodge
responsibility.

(Wimpy disclaimer: this isn't legal advice and maybe it's not true if you live
in Yemen or something, I dunno)

~~~
nols
I really think that it's not even a smokescreen as much as it's really what
they think. "Why should I assume any risk when I'm just a reseller?" is a
common thought among many new companies. They don't really see themselves as a
business with its own risk as much as a subsidiary of the company.

It's just a sign of naiveté among many new entrepreneurs.

~~~
spacemanmatt
A necessary question: What value am I providing?

In their case, they dodged providing any at all.

------
kyledrake
I've helped work on Project Skyhook, which is a $1000 Bitcoin ATM:
[http://projectskyhook.com](http://projectskyhook.com)

Orders ship within 2-3 weeks. Shipping to Canada is no problem, customs is no
problem. Assembly is in Portland, Oregon, so it's a quick ship to Vancouver.
We've shipped hundreds of units.

Setup is completely on the owner's end. Owners don't need the company to
configure the unit, and the company doesn't need to run servers for them.
Skyhook ATMs use blockchain.com for the wallets (using accounts the owner
creates independently), and the exchange price source is the owner's choice,
all controlled through the interface. This isn't to avoid having a setup phase
- it's to allow owners to have complete control over their money, because then
it's a trustless system (the source code to the ATMs is open and auditable:
[https://github.com/projectskyhook](https://github.com/projectskyhook)).

I'm astounded at the prices on some of these ATMs. For $25,000 they could have
ordered 24 Skyhooks (a little padding for shipping, which I believe can be
palleted to save money). Bitcoin ATMs shouldn't cost the down payment on a
house, IMHO.

Skyhook is also completely bootstrapped by the founders (no VCs) and a result
of that (and careful burn rate management) is now profitable, despite the low
price point. The cofounders have been using some of the money (and their free
time) to help clean up and build out a new hacker/makerspace in Portland
that's going to be awesome. Easily the best group of people I've ever had the
privilege to work with.

I wish more people approached startups this way. There's a real pride to
making companies on your terms that you control, and succeeding at it.
Startups shouldn't be about overvaluing your company and having Kid Rock do a
rock concert in your back yard.

~~~
jboggan
The physical security on units such as these, or the majority of newly
manufactured Bitcoin ATMs, is a joke. There's a good reason to build a large,
heavy safe into an ATM, and all but the very strongest and most expensive can
be broken into trivially. Bitcoin ATMs are even worse than cash ATMs from this
perspective because physical compromise of the machine potentially nets you
private keys.

Small/cheap units like this also don't support industry standard features like
Mas locks or other one-time-combination locks to allow third party security
and cash replenishment organizations to service them. [0] A used Mas lock (or
its equivalent) will run you at least $500 and newer units are easily over
$1,000 [1]

I'm speaking as a former ATM technician.

0 - [http://www.kaba-mas.com/kaba-
brand/products/366024/cencon.ht...](http://www.kaba-mas.com/kaba-
brand/products/366024/cencon.html) 1 -
[http://www.jmacsupply.com/Kaba_Mas_X09SRD00FZJEZ1A_p/KABA-
MA...](http://www.jmacsupply.com/Kaba_Mas_X09SRD00FZJEZ1A_p/KABA-
MAS-X09SRD00FZJEZ1A.htm?gclid=CIzErPSCr8ECFaIF7AodmFMAgQ)

~~~
iancarroll
If the password on boot option actually encrypts something, wouldn't that
solve the problem?

~~~
kyledrake
That's what it currently does.

~~~
axoltl
The code seems to suggest this was written by someone that isn't all that
versed in crypto, which is more than a little worrying for an ATM:

hash_pbkdf2('sha256', $password, $salt, self::ITERATIONS, $saltSize, true);

where self::ITERATIONS is 500. That's extremely low.

Furthermore, they're using CBC mode encryption for the 'config' file rather
than an authenticated cipher. The only 'authentication' there is is whether
the file inflates. Because the IV is in the encrypted file (and I can pick any
password), I can make the first block decrypt as anything. Depending on when
gzinflate throws an error, I could potentially make the decrypt succeed with
just control over the first block.

Neither of the issues is (in this case, because it's 'just' the config file
encryption) probably anything to especially worry about, but it does show that
other, more critical, parts of the codebase might not be up to snuff.

------
jmathai
Absolutely terrible.

I have the feeling that Jordan knows exactly what he's doing. The amount of
$20,000 is a lot but it's not that much once you start to hire lawyers and
file a suit or go into arbitration. Sounds like he's stringing them along
waiting to see how much more cash they're willing to invest to recoup that
$20,000.

Even worse Jordan might be setting himself up for a settlement of less than
$20,000 where he keeps some of the money but knows it's a better offer for
Andrew and Rajiv than hiring lawyers.

Been there. Done that. I'll never look at a purchase or legal document the
same again. Jordan's got the upper hand here.

~~~
flyinglizard
I wouldn't say Jordan has the upper hand. Managing the reputation of the
company is critical for the survival of a startup. Andrew may lose, at worst,
$20k, but Jordan can lose everything (unless its a scam or they already made a
substantial profit from these machines).

~~~
jellicle
Let's recap the situation:

Andrew: has no money

Jordan: has all the money

Which side were you saying is losing again?

~~~
kaoD
> Which side were you saying is losing again?

His investors.

------
ObviousScience
From my experience with one of their ATMs (both myself and two friends using
it), they're incredibly error prone and not even shitty-ATM levels of usable.
(I'm loathe to name locations, since the owners of the ATM are friends of mine
and have dealt promptly with any problems I've had stemming from the ATM.
They're often at the bar where it's located, as bar customers, and I've seen
them deal with other upset ATM users. Great businessmen, bad equipment.)

That being said, it doesn't really surprise me that people with that poor of a
user experience have poor customer service.

What is it about the bitcoin market that seems to attract less-than-ideal
business practices?

~~~
joegaudet
A currency that defies regulation attracts less-than-ideal business practices
- our highly regulated baking system attracts poor business practices, none of
this should be surprising.

------
Blackthorn
I am shocked, _shocked_ that a Bitcoin-related vendor was crooked.

Really, this story does totally suck for you guys but there should be
absolutely zero trust or respect for anyone selling anything related to
bitcoin at the moment. You're just begging to be ripped off.

------
cstrat
wow that sounds like a horrible experience! it is unfortunate that you got
stung like that.

out of interest, what was the expected ROI? I mean, you sunk $25K into it.
even if you were charging 5% fees - you would need half a million in
transactions to break even, and that isn't including the monthly rental fee
for the location.

is there really that big of a demand for BTC in a pub?

~~~
ohazi
I think the idea is that there's demand for _cash_ at a pub, but I also don't
see how you'd reasonably expect to break even with this setup.

~~~
cstrat
Ah yeah thats right, when I read the emails, it read more like an ATM that
accepted deposits (there were currency scanning issues attributed to the
polymer notes) rather than cashing out. I guess it would work both ways.

------
armenarmen
I was looking at going in on one of these with a friend. Thanks for the heads
up. Good luck getting your money back, the whole thing seems hellish.

------
epaga
Robocoin CEO (Jordan) has responded here:
[http://www.reddit.com/r/Bitcoin/comments/2jakg4/the_great_ro...](http://www.reddit.com/r/Bitcoin/comments/2jakg4/the_great_robocoin_ripoff_how_we_lost_25000/cl9yw80)

------
jhonovich
Important lesson for expensive capital goods: Pay upon delivery or net 30. Do
not pay in full before shipment.

------
nashequilibrium
Wow and the ceo acts like he is killing it on twitter. If this is how you guys
were treated,i guarantee you there is lots more. Thanks for going public as
this will save a lot of other people time and money.

------
conductr
I used to place/sell regular ATMs. This Stuff sounds pretty standard for the
industry. Nobody, even the biggest companies, seem to know what they're doing.

------
wyager
I've heard nothing but bad reviews about these things from the user end as
well.

I have no idea why one would buy a Robocoin machine when there are a number of
evidently superior alternatives.

~~~
agorabinary
How are the alternatives "evidently superior"? Not that I doubt this Robocoin
experience, but playing devil's advocate and the bitcoin economy... is a bit
necessary.

When Butterfly Labs was scamming people over so long a period, it was
difficult to mention them without a flurry of negative personal anecdotes
coming your way. Is this also the case with Robocoin, or is this an isolated
incident?

~~~
wyager
>How are the alternatives "evidently superior"?

The existence of positive reviews and relative lack of negative reviews.

------
AYBABTME
Sad story but:

> We’re prepared to take legal action, but we figured we’d give Jordan a taste
> of internet justice first.

IANAL but, I don't think you're helping your case by seeking internet justice.

~~~
flyinglizard
First, he's doing the morally right thing by calling them out after a fiasco
spanning several months, backed by correspondence.

Second, applying public pressure to get his refund is much better than going
to litigious way, unless he seeks damages too (which I believe he doesn't -
just wants his refund back).

~~~
leovander
I get that we are on the Internet and everyone gets a voice, but they should
have let their lawyers do the talking. Both companies are run by adults I
assume, but both are throwing sand in each other's faces running across the
playground, in this case reddit, Twitter and HN. Either party can use this as
slander I suppose.

If Robocoin is still making money, this bad PR might go against them for just
a bit, but their "success" with others will pass on via word of mouth.

If acting like kids on the Internet has worked well for others in order to get
their own back, someone should write up a pretty medium article outlining a
proper way to do this for any company.

~~~
PeterisP
Disregarding the legal issues, warning other customers of such behavior is
pretty much a moral duty - keeping mum, as you propose, would be a shameful
behavior and if everyone did that way then we'd have a worse society.

~~~
paulhauggis
Maybe. But 9/10, we get a hate mob fueled by a one-sided story by someone who
feels "offended".

There isn't enough punishment when it's all based on false information. In
fact, there's none. If I was the target, I would be personally ruining the
lives of the people that started it. It would be my moral imperative.

look at what happened with notch and minecraft. Silly children that couldn't
get their own way decided to get the masses sending him shitty and hateful
messages, which eventually led to his quitting/selling to microsoft.

------
smileysteve
This type of experience is why I don't understand "No Chargeback" or "Replace
the credit card" type marketing.

If I purchase this with my credit card and don't get the product before the
price goes down, I have the option to cancel the order or get the lower price.
If the product gets stuck in RMA or support is not as promised, I can
chargeback.

The 'advantage' of bitcoin is that now I have to deal directly with the
vendor, who is not my advocate.

------
vmp
Is it such a good idea to invest in something that's built on deprecated
software (Windows XP)? And to handle money, no less. I'm a layman in regards
to this, but is there a valid reason to choose XP over, lets say, a LTS Ubuntu
release? Maybe some PCI ruling or something like that? Just seems strange and
I've had a bad vibe ever since I read it.

~~~
wodenokoto
It's quite common for ATM's to be running Windows XP, so maybe that is why
this one is doing it as well. And ATM's and POS machines running XP do still
receive security updates.

~~~
daeken
It's common for ATMs to be built on XP, there's no denying that. But the
reason is because they were built on it initially, when it was still okay to
do so. To using Windows XP for the base of an ATM (especially one that -- by
design -- must be connected to the Internet) in 2014 is more than
irresponsible. I can't imagine the kind of cargo cult thinking required to
make that decision.

~~~
smm2000
I am pretty sure that manufacturer of ATM used XP as a base and Robocoin did
not really have a choice. They could have chosen different ATM company, but
it's not like manufactures are fallen over themselves to sell 70 ATM machines
to new start up.

------
blt
First warning sign: smiley faces and hashtags in Robocoin's initial email
responses. I would expect nothing but professionalism from someone who just
sold me a $20,000 product.

~~~
javajosh
This stuck out for me, too. Jordan was far too chummy in his responses. This
signals, "I want you to like me so that when I fuck up you will give me more
slack." It's not genuine warmth, it's a cynical, sociopathic ploy to garner
imaginary "friend credits" that can be traded for real money when need.

(It actually reminds me of how mobile customer service call centers
repeatedly, obnoxiously apologize, to the point where they seriously degrade
the service. I would much rather a person _help_ me than waste time
_apologizing to me_.)

------
lazyjones
I have had some dealings with fraudulent merchants (while running a popular
price comparison site and dealing with customer complaints, criminal charges
against mervchants etc.) in the past 14 years and my gut feeling with this is
that this Jordan has already spent your money on his expensive lifestyle.

It's the repeated false promises and claims he makes in his e-mails that
create this impression, for example the quick refund. A serious businessman
only promises this if he can make absolutely sure that the customer will get
it (and it doesn't matter that he wrote "we hope to ...", it's a clear
message). I've also read Jordan's reddit posts, sounds fishy as hell.

------
tim333
I'm curious if anyone has seen a working Robocoin ATM? Jordan says on Reddit
there are "65 out an live in the world"

------
josu
Jeff Berwick, one of the founders of the project withdrew from it back in May
2013.

[https://www.dollarvigilante.com/blog/2013/5/2/my-official-
wi...](https://www.dollarvigilante.com/blog/2013/5/2/my-official-withdrawal-
from-the-bitcoinatm-project.html?utm_medium=twitter&utm_source=twitterfeed)

------
skyjacker
Personally, I've tried five times to make small purchases with Bitcoin (this
was several years ago). In all cases I was ripped off and never received
product.

It's not going to be government regulations that kill Bitcoin, its the
associations with illicit drugs, child pornography, and dishonesty of vendors
like Robocoin.

~~~
eric_bullington
On the other hand, I've been into Bitcoin since early 2011, have made hundreds
of purchases with Bitcoin, gotten made for major contract jobs in Bitcoin,
paid other contractors in Bitcoin, and _never_ been ripped off. You just have
to exercise some caution and do your due diligence.

Unfortunately, Bitcoin has attracted more than its fair share of scammers --
in part because the core community was at one time pretty naive -- but it's
also full of honest people who are attracted to Bitcoin for ideological
reasons, and fellow technophiles who are happy to engage in honest commerce
with other people.

~~~
knowaveragejoe
While that's all well and good, I don't think that will translate so well into
the mass market. At least not for some time.

~~~
eric_bullington
That's OK. As long as there is a large enough population using Bitcoin to
create a small economy, that's fine with me. Right now, I get paid in Bitcoin,
and pay for about 40%-50% of my household expenses in Bitcoin (and increasing
monthly).

For people who are attracted to Bitcoin for ideological or technological
reasons, mass adoption would be nice, but it's not as important to us as it is
to the massive wave of "to the moon!" speculators who came in last fall.

------
AJ007
This wouldn't be the only company selling Bitcoin related hardware that
probably should not be in business:

[http://www.ftc.gov/news-events/press-
releases/2014/09/ftcs-r...](http://www.ftc.gov/news-events/press-
releases/2014/09/ftcs-request-court-halts-bogus-bitcoin-mining-operation)

(Butterfly Labs)

------
hatty
Full refund processing.

"Hey [omitted],
[http://www.reddit.com/r/Bitcoin/comments/2jakg4/the_great_ro...](http://www.reddit.com/r/Bitcoin/comments/2jakg4/the_great_robocoin_ripoff_how_we_lost_25000/cla6b7d)

It was really poorly handled. I take full accountability." -Jordan

------
tobiasSoftware
Was just reading the reddit thread and Jordan posted a picture of a transfer
of $25000 to Andrew. However the details were not blacked out properly, you
could see the address easily and could probably figure out the account numbers
given a bit of time. The picture has since been removed.

------
jordanrobocoin
Apology letter from Jordan:

[http://www.reddit.com/r/Bitcoin/comments/2jakg4/the_great_ro...](http://www.reddit.com/r/Bitcoin/comments/2jakg4/the_great_robocoin_ripoff_how_we_lost_25000/cla6b7d)

~~~
slapresta
Discussing this apology without discussing the Reddit comment it replaced only
tells half the story:

[http://i.imgur.com/WXyGPM3.png](http://i.imgur.com/WXyGPM3.png)

------
runn1ng
A Bitcoin - related company committing fraud and acting scammy? I am
_shocked_.

------
jafingi
Wow, what a devastating story! Really feel sorry for you guys. I have
retweeted your tweet.

But let this be a reminder that you should never pay the full amount up front.

Hope you will get in court with that smarmy Jordan Kelley.

------
joshmn
For things like this, I find great "relief" in using BananaTag
([http://bananatag.com](http://bananatag.com))

------
tyang
Next time pay using a credit card. :)

------
tomaspollak
funny thing: 'robo' in spanish actually means theft.

------
geobz123
Thanks for sharing.

That guy Jordan deserves to be brought in Justice.

------
kreinba
That is a really sad story...

------
lazyant
google "translate robo"

------
pearjuice
Meanwhile: Dorian Nakamoto - alleged Bitcoin founder - is trying to raise a
fund because this whole Bitcoin entourage and goldrush has destroyed his
personal life. Hopefully if Andrew gets a refund he will be so nice to donate
a bit to The Dorian Nakamoto Legal Defense Fund.

[http://www.newsweeklied.com/](http://www.newsweeklied.com/)

~~~
eli
Kinda seems like more of an "attack fund" than a "defense fund." Also doesn't
really seem to say how Dorian was harmed.

------
everydaypanos
1\. Going public on this shows lack of common sense, since the guy there said
that contract had 0 refunds in it...

2\. Expecting to pay $25k and pressing a button and then making $2k per month
for eternity is NOT wise.

~~~
probably_wrong
Regarding point 1: a contract is an agreement between two or more parties. In
this case, Robocoin agreed to deliver a working Bitcoin ATM, and Andrew and
Rajiv agreed to pay a certain amount for it.

Robocoin didn't do what they promised they would do, or did it badly.
Therefore, A&R are not required to uphold their end of the deal - in fact, if
they are willing to take the matter to court, they are also entitled to get a
compensation for all the extra money they lost.

So even though the contract specifies "no refunds", that contract was broken
by Robocoin, and therefore A&R should indeed get their money back.

~~~
spacemanmatt
I am often shocked when I hear people lean on that "it's in the contract"
nonsense. State and federal law have always superseded contract law, or else
people could overthrow the government by means of contracts. It's just a
ridiculous notion to hold, as evidenced by the ridicule heaped on it here,
reddit, and twitter.

