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6 Bitcoin Scams To Avoid When Using P2P

2021-06-30

At Binance, we take user protection seriously, so we consider it our responsibility to constantly keep our users updated on security tips and advice. In this article, we share six scams that you should watch out for when transacting with Bitcoin and other cryptocurrencies on P2P platforms like Binance P2P.

But first, here’s a quick reminder on why Binance P2P is the ideal platform for safe and convenient peer-to-peer transactions such as buying and selling cryptocurrency.

1. Binance P2P’s escrow service protects users. Once a buyer places an order, the seller’s cryptocurrency will automatically be transferred from the seller’s wallet to a temporary deposit via the escrow service, giving traders peace of mind. Learn more about the escrow service here.

2. Binance P2P supports 300+ local payment methods and 70+ local currencies

Binance P2P, the world’s leading peer to peer platform, has over 300 payment methods and supports over 70 fiat currencies worldwide, allowing for easier and quicker fiat transactions.  

Beware of These Bitcoin Scams

Below, we inform our users about common scams that happen during Bitcoin transactions such as P2P trading. We share this information in hopes that our users become wiser about the use of Bitcoin and trading platforms by avoiding these scenarios. Part of enhancing security for crypto is the task of boosting the security awareness for its users because ultimately, you have the most important role when it comes to keeping crypto secure.

Aside from the scams we will enumerate below, we also have the following articles we created recently:

1. Romance Scams

The first of the three man-in-the-middle (MITM) scam scenarios we will feature, a romance scam preys on your emotions to distract you from a scammer’s true, nefarious motive. This may sound like something we will not fall for at first glance, but this scheme is more widespread than you think. In 2019, over 25,000 victims reported a total of $201 million in losses from romance scams, the second-most reported crime to the FBI that year, according to the U.S. Fair Trade Commission. 

In this scenario, a scammer finds victims via dating apps like Tinder and forges online relationships with them, building trust over time. At one point, the scammer will manipulate the victim into helping him with his financial issues by sending some Bitcoin or other crypto. What the victim doesn’t know is that the scammer has provided the details of an unrelated crypto seller, who will then unknowingly send money from the victim to the scammer, thinking that it’s a typical crypto-to-cash transaction. 

At this point, the scammer runs away with the money. The victim, realizing the scheme, will try to cancel the transaction and report the incident to the police, which will then proceed to reverse the transaction and punish the crypto seller without getting to the actual scammer.

How to Avoid: In P2P platforms with escrow services, like Binance P2P, this scenario can be prevented, as the seller and the buyer will know each other’s true details before proceeding with the transaction. However, this can be harder to combat if the scammer has manipulated you emotionally into believing everything he says. Ultimately, you should walk away from a financial transaction like this when things start to be a bit suspicious.

2. Investment Scams

If romance scams deal with emotions towards a fictitious “lover,” what drives this MITM scam scenario is an individual’s desire to quickly profit from an investment. Unfortunately, with the boom of crypto prices earlier this year, investment scams are on the rise. Between October 2020 and March 2021, the FTC received about 7,000 scam reports of this nature, 12x the figure a year ago, causing $80 million in losses.

In this scenario, a scammer finds victims who are looking for quick-profit Bitcoin investments and entices them with “guaranteed” gains that they should get into ASAP. It can involve fake apps and websites that pretend to show a person’s profits. At some point, the scammer will ask the victim to send money to his account, in exchange for the Bitcoin he earned. Unknown to the victim, the account is actually owned by a crypto seller unwittingly set up by the scammer to be the middle man in the scam. The victim sends the money to the crypto seller, who then unknowingly sends the Bitcoin to the scammer. 

Similar to the previous scenario, after the scammer runs away with the money, the victim will report the incident to the police, who will then punish the crypto seller for a crime he did not commit. 

How to Avoid: In this scenario, it is the responsibility of a person entering into an investment to verify if it is legitimate. The mentality here is that when something is too good to be true, it usually is, especially when it comes to money. On the crypto seller’s side, it pays to do due diligence on the people you transact with, which is made easier when it comes to platforms with identity verification practices like Binance P2P. Make sure the Binance name and Bank name are the same to avoid these issues.

3. Ecommerce Scams

This modified form of this MITM scheme involves e-commerce transactions on dubious platforms. As the adoption of Bitcoin as a global payment method is still underway, scammers can see an opportunity to entice unwitting victims with low prices on the things they want to buy. 

For instance, a scammer finds a person who is looking to buy an item online. The scammer offers very low prices on that item to the victim, who then reaches out to inquire about the item. When the time comes for the victim to pay for the item, the scammer presents him with a crypto seller’s information, claiming that it’s his account. Once a victim pays for the item, the crypto seller then unknowingly sends crypto to the scammer on the other end. Once the scammer exits, the story ends badly for the victim and the crypto seller, as in previous scenarios.

How to Avoid: To add to the previous points raised in MITM schemes, we like to point out that there are legitimate payment options for buying items online using crypto, such as Binance Pay. Make sure the Binance name and Bank name are the same to avoid these issues.

4. Fake Receipt Scams

When doing P2P transactions online, it’s important to closely check the information being sent to you by your counterparty. Sometimes, scammers manipulate screenshots and other photos to claim that they have done their part of the deal and to pressure you into doing yours as well. Once you comply with a scammers’ pressure, without verifying yourself if you have indeed received the money he sent, you will end up losing money for nothing, and you will have a hard time correcting it. 

How to Avoid: Always make sure to check your bank account or wallet to confirm that you indeed have received any money that’s supposed to come your way from a P2P transaction. 

5. Chargeback Scams

Sometimes, a scammer can take advantage of the chargeback features on some payment platforms to defraud his counterparty in a P2P transaction. In other words, after a P2P deal is completed, this scammer will trigger this chargeback and claim the funds to cancel or reverse the initial payment he made. This happens especially if the seller rushes into approving the transaction without carefully checking that the money is already in his bank account or wallet.

How to Avoid: Make it a habit to keep screenshots of your transactions as proof that they were completed, to combat a scammer’s chargeback attempts, especially when contacting customer support about cases like this.

6. Wrong Transfer Scams

Sometimes, after a P2P transaction is completed, a scammer may pull off an attempt to void the transaction. This may involve calling his bank to cancel the transaction, claiming that the fund transfer is wrong or that his account was stolen. Once a seller loses his money this way, the scammer then scares the seller into not reporting the cancellation to the police, by saying that cryptocurrency is “illegal” or through some other claim.

How to Combat: This is where your transaction screenshots can come into play as evidence that the scammer is acting in bad faith. Do not be intimidated into these scare tactics; calmly gather evidence, such as screenshots of your correspondence with the scammer and other helpful details. Binance P2P is here to help you settle cases like this.

Conclusion

Regardless of which scam may be attempted against you in P2P trades, it’s important for users to know these three things:

1. Always make sure that you have already received the same amount of money as stated in Binance P2P total order, no more and no less, before releasing your crypto.

2. Make sure that the account details provided on Binance matches the actual bank account you are using to avoid MiTM issues.

3. When it comes to transfer notes on Binance P2P, always use the order number related to the exact transaction.

It pays to know every possible scenario in which your P2P transactions can go wrong so that you can develop the habit of correctly verifying and executing every deal you make. For more information about Binance P2P, read these articles: