Common Bitcoin P2P Trading Scams

If you’ve spent any amount of time on Bitcoin Twitter, you’ve probably heard someone ranting and raving about the wonders of P2P Bitcoin trading. They’ll tell you how exchanges are KYC cesspools and how you should rather pay for overpriced Bitcoin from P2P traders; that way, it’s not tied to your identity.

This is true, P2P does protect your privacy, but it’s not without its pitfalls.

P2P trading is a way to make money through buying and selling Bitcoin from one individual to another without the involvement of traditional financial institutions or automatic market makers. Traders are looking to profit, so they’ll add their markups and compete with other sellers for buyer interest.

Sounds great, right?

But beware, there are risks involved. Scammers are always on the lookout for new targets, especially those who are new to the world of Bitcoin. While P2P premiums can be steep, the highest premium you can pay is getting scammed and ending up with zero Bitcoin.

How to spot common red flags.

One common red flag is when the other party insists on conducting the trade outside of the P2P platform. This is often done to avoid transaction fees or to make things more convenient for the other person, but it can also be a sign of a scam.

Transactions conducted outside the platform are not protected by the platform’s escrow service, which means you may not receive your Bitcoin after sending your payment.

Strict payment methods.

Another red flag to look out for is when the other party insists on using an unconventional payment method, such as gift cards or wire transfers. These payment methods are often irreversible, which means that once you send the payment, you may not be able to get it back if you don’t receive your Bitcoin.

Sticky honeypot deals.

Lastly, be wary of offers that seem too good to be true; these honeypot offers are a dead giveaway. Scammers often use enticing offers to lure in unsuspecting victims. Before engaging in a trade, research and ensure that the other party has a good reputation and that their offer is reasonable.

Protecting your personal information.

It’s important to be vigilant when it comes to protecting your personal information in P2P bitcoin trading. Scammers are always looking for new ways to deceive potential victims and steal their personal data. 

One common tactic is to ask for personal information such as your name, address, phone number, and bank account details. Another is through your payment method; apps like PayPal will give the user your contact details tied to your account, so be sure you’re happy with the information handed out on the fiat payment method you use.

Never give out any personal information unless you have an established relationship or you are certain that the other party is trustworthy. Personal information can be used to threaten or blackmail you. 

Protect against malware. 

Before engaging in a P2P bitcoin trade, ensuring that your computer and online accounts are secure is essential. This includes using strong, unique passwords for all of your accounts and enabling two-factor authentication whenever possible. Also, avoid downloading files or clicking on links from the chat; this could be a way to introduce malware to your computer. 

Using escrow services to stay safe.

An escrow service acts as a neutral third party that holds the bitcoin or other funds being traded until both parties have fulfilled their part of the agreement. This ensures that neither party can abscond with the funds without fulfilling their end of the bargain.

Many P2P bitcoin trading platforms offer built-in escrow services, which can be convenient. However, it’s important to thoroughly research the platform and the escrow service before using it. Some scammers may point you to copycat websites and set up fake escrow services to steal funds, so be sure to verify that the service is legitimate.

Using an escrow service can provide an additional layer of security when engaging in P2P bitcoin trading. However, it’s important to remember that escrow services are not foolproof, and scammers may still attempt to defraud you.

How do P2P traders try to defraud you?

During my time in the P2P game, I’ve come into contact with several scamming tactics that are commonly used.

False restrictions.

One of the most common tactics is claiming they have sent the funds to you, but it won’t go through because your order amount is too low. You would need to order a larger amount of Bitcoin for the transaction to go through. The trader will encourage you to cancel this deal and then place a new order for a larger amount so you can get your coins.

A P2P platform would not allow the trader to create an order without the backing of funds, so the funds are already there and in escrow; this is a lie to get you to break the escrow. 

In this situation, you only need to wait; if they don’t release, lodge a dispute and claim your coins. 

Issues with payments put on hold. 

Another common tactic is a claim that your payment is on hold, and until the payment clears in their account, they will not release the funds. The scammer will again have preset fake screenshots ready, updated with your payment details and provided as proof that the payment is on hold. 

• They will then try to get you to cancel the trade, saying cancel now and re-open tomorrow when the funds clear. 
• Alternatively, they will encourage you to make a second payment, either from the same or a different service, claiming they will refund the first one and release your coins.

In this situation, you must mark your trade as paid since it has been paid. The trader can release the coins once the hold is removed, or they can refund your payment when the hold is removed.

Either way, you will remain patient but not break the escrow by cancelling the trade until one of those conditions is met.

You paid me short. 

Another common tactic is the claim that you didn’t pay the full amount, usually claiming that the payment provider took off additional fees and you need to pay the balance or they won’t release the coins. Scammers will even send you fake screenshots that contradict what is displayed on your payment method to try and confuse you.

Don’t believe it, don’t pay any extra fees, ever. 

If a scammer pulls this stunt, you have three options: 

• Tell them to refund your fiat amount, and you will close the trade once the funds are returned.
• Tell them to lock a second batch of funds in escrow for that amount; you can mark as paid and release it. (They won’t do it)
• Hold on until you can dispute, provide proof of payment and have the funds released by the moderator. 

You didn’t pay, and you are the scammer.

Some scammers even have the nerve to claim that you have not made your payment and will try to intimate you, saying you are the scammer. They will report you and even dispute the trade and try to lodge threats to try and intimidate you into breaking the escrow and cancelling the trade. 

They will hurl a host of threats and lies in your direction, but all you need to do is keep calm. You’ll notice how as you take your time, they will get desperate and change their tune and try different approaches. 

This all works in your favour, as moderators can see all the conversions; it’s in your interest to keep them talking; they will only incriminate themselves further, giving you a stronger case for moderators to side with you.

Fake issues with payment.

A scammer might take your payment details and create a fake screenshot claiming the payment failed on their side or that there is a chargeback on the payment. This tactic is used to either get you to cancel the trade until the account issue is resolved or encourage you to make a repeat payment. 

Either way, do not believe anything they say or the screenshots. 

As long as your payment provider claims the payment is made, that’s all you can do, so hold on and let time go by until you can dispute a trade.

How to protect yourself against P2P scams?

If you still plan to conduct P2P Bitcoin trades, you should protect yourself by using the following tactics.

Take screenshots

Make a habit of taking screenshots of all of your transactions as proof that they were completed. It’s important to have concrete evidence of a scammer acting in bad faith, especially information that is off-platform, like chats, emails, transaction details, or correspondence via a payment provider’s chat like PayPal. 

If issues arise, you already have all evidence, such as screenshots and correspondence, and use it to make your case with the P2P platform and to prevent chargeback attempts. 

Familiarise yourself with escrow services.

Use the platform’s escrow service. P2P platforms typically lock the Bitcoin amount posted in a seller’s ad to ensure the seller doesn’t scam buyers. Don’t be afraid to walk away from a transaction if things start to become suspicious, and you can rather leave coins locked in escrow until moderators resolve it but do not cancel a trade if you’ve paid for the Bitcoin.

Identity verification.

While P2P trades are marketed as a place for non-KYC trades, this is not an absolute rule, and certain P2P platforms offer the option to verify your account with an ID. If you are uncomfortable with trading, you might want to use traders who verify their identity before starting a transaction by ensuring their payment account details match the identity listed on the platform. 

Verified accounts are not foolproof either, as scammers can easily buy IDs from others to KYC several accounts. When it comes to trading with KYC traders, look at those with many trades and a host of unique feedback, they can be individuals or businesses who see this as a way to differentiate themselves and secure regular customers. 

Confirm transactions.

A buyer or seller should always check their crypto wallet or bank account to confirm a completed transaction. Don’t trust any screenshots by the seller; make sure balances and fees correspond with what is either showing on your account or your bank statement.

Stick to in-platform conversations.

Limit your conversations with the buyer or seller to the P2P platform. Don’t agree to use outside communication channels like Skype, Zoom, Discord, Telegram, WhatsApp, etc. That’ll only make it easier for them to deny the transaction and raise a false dispute against you or sucker out personal information they can use against you. 

Customer support.

If you’re unable to reach an agreement, immediately contact a P2P platform’s customer support team for assistance. Reputable platforms typically have a system in place to investigate and handle disputes. If a trader starts giving you grief, start compiling your evidence and lodge a dispute. 

Use your common sense. 

If it is too good to be true, then you bet it is. More often than not, scammers will go overboard with their offers to lure you into their trap, with eye-catching wording such as “100% real”, “No scamming”, “Trust me”, and such, as well as offering ridiculously low prices or “better” rates than the rest of the market.

You can also look at the past trades and feedback; if past trades are all with small amounts and the feedback is all generic and all positive, it’s likely fake trades to make it look like this account is legitimate.

You’d be surprised how many scams you can avoid just by sticking to common sense.

Slow down.

Time is of the essence for scammers; they need you to conduct transactions swiftly, so they can remove the bitcoin from the platform used to escrow and be in the clear by moving it to another account, or they’re intent on freeing up that bitcoin to scam another user.

As a result, scammers will try putting pressure on you to make a rushed decision without thinking clearly. They might use social engineering tactics to play with your emotions and increase your anxiety by telling you that if you don’t act fast, something bad will happen (such as being arrested). 

In some cases, they will even lodge disputes or report you as a scammer to try and intimidate you into not doing your due diligence. As a P2P trader, you need to take a deep breath and know time is on your side; you should be happy to wait, ensure transactions are done correctly and don’t let anyone pressure you into making a rash decision.

Since the funds are in escrow, you shouldn’t need to worry; either the scammer will be forced to release, or the moderator will release the funds. 

Building a reputation as an unprofitable account.

I’ve made many P2P trades and gone for the honeypot trades (offers well below market price), too; I will complete the trade using a method that is not easy to reverse, provide proof to moderators and refuse refunds to ensure that I secure the deal. 

I honour the terms of the deal and receive my cut-price Bitcoin, leaving the scammer redfaced. This can only be done a few times before scammers catch on to you.

In my case, scammers refuse to trade with me; whenever I open up a trade with a scammer offering too good to be true deals, many of them will not engage or request that I cancel the trade. The reason being my account has a track record of wrecking scammers, certain scammers will add negative reviews on my profile to warn other scammers, but the most common method is through instant messaging groups. 

P2P scammers tend to work in syndicates, having multiple accounts and recycling the same Bitcoin to defraud newbies. Once you’ve wrecked one or two scammers in that syndicate, you’ll be placed on a watch list, and if you engage with members of that syndicate, they will cross reference the list and refuse to engage. 

Protect yourself and never trust; only verify. 

P2P bitcoin trading can be great for those who seek additional privacy when acquiring bitcoin or become a lucrative endeavour for those who wish to trade on these markets. As with any investment, it’s crucial to be aware of the risks involved. By understanding these risks and implementing the strategies outlined in this guide, you can protect yourself from falling prey to scammers. 

Remember to stay vigilant, protect your personal information, and always use escrow services when possible. As the world of Bitcoin continues to evolve, it’s up to us as investors to stay informed and cautious. 

While these simple steps will help, you need to refine your bullshit detector, and once you get a feel for scammers, they are pretty easy to spot; you can even profit from them once you get good enough or avoid them altogether. Either way, experience is key to enjoying the benefits of P2P bitcoin trading without risking your hard-earned money. 

Are you a Bitcoin privacy advocate?

Are you using non-KYC Bitcoin exchanges? Which app is your favourite? Do you have one you’d like us to cover? Do you have any tips you think should be added to the list?

Let us know in the comments down below.