Nationwide Automated Systems Scam

The Nationwide Automated Systems $123 Million ATM scam has just been shutdown by the SEC.  ATM scams are number 4 on my list of the Top 10 Work At Home Business Opportunity Scams. let’s take a look into this scam to see how it worked.

Here is what the company said about it’s self:

Woman Using Atm MachineNationwide Automated Systems, Inc., is one of the leading ATM providers in the country and maintains an exemplary track record of service, attention to detail, and wide availability across North America, with over 20,000 machines. Nationwide Automated Systems ensures that all of the ATMs that it manages run smoothly and process revenue as quickly as possible. In the event of a disruption in transactions, trained representatives from the firm’s ATM management team will arrive on the scene promptly and resolve the issue with minimal downtime. In fact, Nationwide Automated Systems can normally have an ATM representative on site within two to four hours, due to its wide network of 80 service centers and more than 1,000 technicians. Any issue that needs resolving, from broken or missing parts to software malfunction, can be handled in a manner that goes beyond what most ATM providers offer.

The level of service offered by Nationwide Automated Systems, Inc., also extends to its attention to detail regarding the appearance of its ATMs. By working in conjunction with the best manufacturers in the business, it offers ATMs that can match the décor of any environment, from 7-Elevens and Costcos to high-end establishments like Hilton Worldwide. In fact, its elegant wood-paneled machines currently serve as a fixture at Hiltons, where Nationwide Automated Systems is considered a preferred vendor. Additionally, the firm maintains an A+ rating from the Better Business Bureau. (Here is a clear example of why an A+ rating from the BBB is zero protection from scams.)

Here is what the company said about the business opportunity they offered:

Nationwide Automated Systems, Inc., shares fees generated from its ATMs with each location’s owners, using a revenue-sharing model. It also offers complementary ATM placement for potential locations as an incentive to partner with the company and the international payment processors that it works with, such as WorldPay. Nationwide Automated Systems collaborates with top-ranking payment processors to ensure peak performance from all its machines. In addition, the firm prioritizes security, utilizing armored cars to manage the transport and collection of all revenues.

Nationwide Automated Systems Scam Reality

Nationwide Automated Systems was incorporated in 1996 and is controlled by Joel Gillis.

Nationwide Automated Systems, Inc. (“NASI”) told investors that it is in the business of placing, operating and maintaining ATMs, and that investors could purchase ATMs from NASI, and then lease them back to NASI in return for “rent” of 50 cents per ATM transaction, with a guaranteed investment return of at least 20% per year.

But none of that was true. Legitimate ATM transaction revenue represented only a tiny fraction—less than 2%—of NASI’s actual revenue. The vast majority of NASI’s revenue was comprised of new investor funds.

Investors paid typically $12,000, but in some cases $19,800 per ATM.

NASI also did not actually own many of the ATMs they had bought and allegedly sold to investors. In fact, NASI required investors to contractually promise that they would never contact the locations where their ATMs were supposedly located, all to ensure that no one could discover their fraud.

A former NASI investor called the rural California hotel that NASI said her ATM was located at. She learned that the hotel did not have an ATM on the premises and never had. She then contacted Gillis, and left a message to the effect of, “I know what you’re doing. And I want my money back.” The very next day, Gillis provided that investor with a cashier’s check for the full amount of her investment. He asked her no questions.

In August 2014, NASI bounced approximately $3 million in checks to NASI investors. NASI attempted to lull investors by also telling them that their bounced checks had been caused by a mere “glitch” in connection with NASI’s decision to contract with a new outside firm to manage investor payments. NASI claimed this “system conversion” had not gone “smoothly.”

On Oct. 8, 2014 The Securities and Exchange Commission announced it had obtained an emergency asset freeze and filed civil fraud charges against Nationwide Automated Systems for operating a $123 million Ponzi scheme. – Source SEC

Key Lessons From This Scam

  • Do not pay ridiculous prices for ATMs no matter what the company promises you.
  • Do not participate in ATM leasing schemes.
  • Provide your own location for an ATM you purchase.

Here is an interesting forum that documents from 2009 to the present the problems people had with the Nationwide Automated Systems ATM Scam: Quatloos.com.