Of Bitcoin ATM fraud and AI scams: A conversation with James Brown

In January, James Brown was sworn in as the 18th Montana State Auditor and Commissioner of Securities and Insurance, a high-impact but often under-appreciated role focused on protecting consumers from financial fraud.

Brown's office has swiftly addressed key challenges facing Montanans, including scams involving cryptocurrency and artificial intelligence, bolstering outreach in rural communities, and trying to ensure wildfire-related insurance coverage.

Since taking office, Brown has secured legislative backing for an anti-fraud education campaign, statute changes and helped the agency distribute approximately $2.2 million through Montana’s securities restitution fund — capped at $50,000 per victim — to compensate 141 fraud victims.

Before becoming state auditor, Brown served as the president of the Public Safety Commission and ran unsuccessfully for the Montana Supreme Court in 2022. In last year’s election, he defeated John Repke with 61% of the vote and took office Jan. 6, succeeding Troy Downing, who moved on to represent Montana’s 2nd Congressional District.

In a wide-ranging conversation with the Chronicle, Brown communicated his commitment to the office’s consumer protection mission without political jargon — expressing both seriousness and resolve in his fight against fraud across the state.

This interview has been edited for length and clarity.

BDC: You took over as Montana State Auditor in January — walk us through the main challenges you’ve encountered, and where do your top priorities lie?

James Brown: The big issues that I’m dealing with — and some of them I was aware of when I was on the campaign trail — are increased insurance rates for all lines of insurance, the difficulty that homeowners, particularly on the western side of the state, have finding and obtaining homeowners insurances that contains a wildfire policy, the explosion of fraud that’s occurring against Montanans, namely in the area of cryptocurrencies — particularly these Bitcoin ATM machines that have been popping up around the state. And lastly, a really unique challenge, which I didn’t necessarily expect to face as the agency that oversees securities, is the growing rise of digital currencies and the discussion around how they will be regulated.

So those are some of the bigger issues we’re facing and, of course, we do the general run-of-the-mill issues that you would expect from the Commissioner of Insurance and Securities — we have a number of complaints that we deal with on a monthly basis related to a person’s interactions with their insurance companies or their wealth management advisor.

BDC: In Gallatin County, we've had different people tell us about their experience with Bitcoin ATM machines — likely some sort of elder fraud. Can you talk a little more about that? What are you seeing statewide, and what is your office doing to counter this?

JB: I asked the 2025 Montana legislative session for additional funding for education campaigns across the state about the growing rise of fraud, particularly in the area of cryptocurrency and digital assets. The Legislature gave me an extra $100,000 for the agency over the next two-year period to talk to folks across the state about this growing area of fraud. That’s what we’ve been doing since we received the appropriation. We’ve been holding forums across the state, trying to educate people. These Bitcoin ATMs, I can tell you that I casually observed them before becoming the commissioner, but never really gave them a second thought. Now, I’m seeing the number of complaints that we’re receiving from Montanans who have been scammed because of them, and it’s growing. A few days ago, I met with the Billings Chamber of Commerce and local law enforcement. There are 19 of these crypto machines in Billings alone. I believe there are about 12 or 13 in Helena. We’re seeing them in Bozeman and warning people because we’re estimating Montanans have lost about $600,000 due to fraud from these machines.

BDC: What does this Bitcoin ATM fraud look like?

JB: People will receive an unsolicited email, a phone call, or a text message trying to establish contact with somebody, and then the person tries to gain their confidence, tells them to either go to their local bank and withdraw money or go to a most conveniently located ATM next to a Bitcoin ATM to withdraw money. They'll try to keep the person on the phone for the entire time to make sure that the transaction is completed. There's always a sense of urgency involved with this from the person calling, saying, 'You've got to do this right now.' Unfortunately, a number of these Bitcoin ATM transactions are being completed.

BDC: So, then your agency steps in to prosecute?

JB: Our agency, along with the state Attorney General's Office and the U.S. federal attorney in Montana, is charged with prosecuting fraud-type claims. We are a criminal justice agency, but also the repository for these types of complaints because of the security regulations that we have. Unfortunately, we have not been successful in any instance in recovering the money once it's put into the machine, because what we can do is track the digital wallet to where the money was sent, but we can't get behind the paywall or firewall, if you will, because a lot of the people that are committing these crimes in our conversations with the FBI are foreign nationals.

BDC: And because these fraudsters aren’t based in Montana or even the country, it becomes a federal issue.

JB: We don't have jurisdiction, and we don't have the tools to pursue this, which really becomes a federal matter when it crosses either state lines or internationally. The good news is, however, that we are one of six states in the United States that has a restitution fund where Montana citizens who have been the victim of securities fraud can receive some compensation for their loss. But unfortunately, for many of these folks, our authority is limited by the Legislature to $50,000 — that's the most we can give. Often, we're seeing in multiple instances that people are losing several hundred thousand dollars.

BDC: Any idea where these crimes are coming from?

JB: The FBI is telling us a lot of the Bitcoin-type fraud is coming out of North Korea, of all places. And the reason is that because North Korea is not a country that the world really does a commercial business with, they are always looking for means to get hard currencies, and so they've come up with a scheme to try to steal people's money through crypto fraud schemes.

BDC: For the cases that you do have jurisdiction over, what is your office seeing, or how is it changing under your leadership to handle those cases?

JB: We have made it a priority to criminally prosecute Montanans, unfortunately, who are violating Montana securities laws by trying to do cryptocurrency pyramid schemes. These are people we can jurisdictionally reach. We have people who create a business that does cryptocurrency investments, and then they go out and solicit investments. What happens is they incur losses because, right now, the way the cryptocurrency works, it's more like a stock market type of investment. When they lose this money, they'll start pyramiding. They'll get more and more investors to pay off the people who originally came in. We are currently prosecuting a gentleman out of Missoula for one of these types of schemes. We're trying to discourage fraud by prosecuting — not only educating on the front end, but also prosecuting on the back end. We have several attorney positions that are open with the office, but I'm repurposing those positions to be specifically fraud prosecutors, and we're trying to attract attorneys who are interested in that field so that we can be more aggressive.

BDC: Let's shift to artificial intelligence. What are you seeing and how is your office tackling increasingly complex forms of AI fraud?

JB: This is one of the greatest challenges I face as the existing commissioner. The office has been dealing with insurance fraud and scams for years — traditional forms of financial scams for years — but as you said, there are two areas that are emerging — digital currencies and the sophistication of AI. We are seeing the sophistication of these scams increase substantially because AI is a very good tool to deceive people. So, we employ four investigators in our office who are dedicated to investigating these kinds of crimes, and we have sent our investigators to training to keep up to date on the newest forms of fraud that we're seeing, how AI is being used, how Bitcoin is working, and what authority we have as a regulator to pursue digital currency fraud. The reason that these digital currencies even arose is because people didn't want to have transactions with government oversight, and so we are a little bit handicapped there. We're being very aggressive right now in trying to get a handle on these. The most nefarious of the AI frauds is that with the use of AI, our voices can be captured now and replicated. It's truly amazing. It can be used for good or bad, but what we're seeing is the bad side, and we've had several instances reported by seniors in Montana where they believe that they received a call from their grandson or granddaughter indicating that they were in some kind of criminal trouble and needed money sent to them very fast. It’s truly remarkable.

BDC: Scary.

JB: It is.

BDC: Beyond hunting down fraudsters, you’re also responsible for the insurance regulation. How do you balance consumer protection while maintaining a competitive insurance market for the state?

JB: 60% of our agency's work is dedicated to the insurance side. It's the main thing that we do is insurance regulation, and primarily what we're trying to do is to ensure companies that do business in Montana on the insurance side are solvent, so that they don't go bankrupt, and we want to make sure also that the rates that they are submitting for use are not excessive. I don't have the authority to regulate rates, like I can't tell a company what their premium rate is going to be, but we do ensure that they're not excessive. Just this year alone, we've saved Montana insurance companies almost $16 million in excessive rate increases. I am tasked by the legislature with being the consumer advocate. We have an entire division that is dedicated to consumer protection for those who deal with insurance companies in Montana. We are the repository of complaints for people, and we do investigate those. We are a criminal justice agency in addition to being a regulatory agency so, on the consumer protection side, we can take regulatory action against an insurance company if we believe that they're not following the law, but we can also prosecute bad actors. That might be, in one case, defrauding the insurance company, or if insurance companies are defrauding their customers.

BDC: Locally, Big Sky is facing a major crisis with the cost of homeowners' insurance. The Big Sky Fire Chief has said some homeowners are paying $40,000 to $90,000 a year for home insurance. This year, residents of the Spanish Peaks area came together to build a new fire station to lower their risk rating using a rural improvement district — the first such instance in Montana. How is your office working to prevent non-renewals and ensure coverage remains available and affordable?

JB: I don’t really have any power to ensure that there aren’t non-renewals. The power I do have — and I sent out an advisory memorandum to insurance companies earlier this summer — is that it is unlawful in Montana for an insurance company to non-renew based on immediate or perceived immediate wildfire risk. There are non-renewals that are happening in Montana and growing because of perceived wildfire risk, including in the Big Sky area. What we do have the power to do is to work with local communities and insurance companies to ensure that the infrastructure is in place that would allow insurance companies to determine they have less risk in a particular area, such as proper zoning regulations, egress, and nearby fire stations.

Part of the reason that we're seeing wildfire risk explode in Montana is two-fold. One is that we have a growing number of people who are moving into the state, and a number of those people are now building in the Wildland Urban Interface. They're building in locations that are susceptible to fire risk, and they may not even know that they're doing that, and what consequence that will have for rating their house for insurance purposes. If you build in a forested area, and you build a $5 million home on a single dirt road that has only one way in, I mean, the insurance company rightly is going to risk you at a high rate, and they may cancel your policy because they believe that eventually they're going to incur a loss on that property. What I try to do when I talk to people is to encourage them to think about where they're building, what the access is to their property, how close they are to a fire station, and whether they are living in a community that is a fire-wise type of community that would help lower the wildfire risk rating.

BDC: And the other piece?

JB: The other piece that I was talking about with the population is that we know Montana has short inventory on housing — the price of housing is going up, and this is one of the main drivers of why homeownership rates are occurring in Montana, because the price of housing is going up. People are paying more for individual properties. You're insuring a property that is worth more, and so your premium is going to be more, because what the insurance companies are doing is they're insuring you as to what the replacement value of your house would be.

BDC: During the election, you mentioned that a goal of yours was to better serve rural communities, to ensure they have access to your agency's government services. How are you doing that?

JB: I immediately went to the Legislature and asked for $100,000 increase in our budget for us to have staff or me go out and do presentations across Montana about not only fraud but also increasing insurance rates and general education about what our office does. There was a lot of confusion given the name of the office — the auditor’s office. The first question I often get is, 'What do I audit?' Which is nothing. I’m the Commissioner of Insurance and Securities. So that's an education piece. I can tell you that in 2025, I have presented in around 25 counties across Montana. Also on the legislative side, we worked with the legislature on several really quality bills. One is that we talked about the wildfire risk score and how that's being used to either non-renewal properties or to drive up insurance premiums. We partnered with the legislature to do a bill that requires insurance companies in Montana to provide an insurance customer, on request, with their wildfire score, so that people can figure out why they might have been non-renewed. And the second one, which is a really quality bill, which I strongly supported, was that prior to 2025 — this is almost remarkable — it was an unlawful practice for an insurance company to provide a discount to one of their customers when the customer had taken it upon themselves to fireproof their property. That was literally illegal. It was considered illegal rebating. We worked with the legislature to change that statute to say that the insurance company can now work with its insurer to provide premium discounts when the customer does their own remediation efforts. It's a great bill that will go into effect for the 2026 policy year.