Peer-to-peer scam me my dear

Peer-to-peer cryptocurrency exchanges are sometimes a good option to buy crypto, especially if you want to have a little discount or use certain payment method for your personal convenience. And as soon as it involves a (pseudo-)anonymous counter-agent online, you are guaranteed by the exchange service but only if you stick to the rules. If you do not, chances are you could be lead into a scheme which would make you a victim and you will lose an otherwise legitimate dispute or claim.

I have recently given a try to Paxful, one of the biggest P2P crypto marketplaces (and its service especially popular in African countries like Kenya or Nigeria, because of their high crypto adoption rate and overall hyper-active crypto market). In some sense, Paxful acts as a clearinghouse in a deal between a buyer and a seller, providing an escrow service and holding funds until deal obligations are fulfilled from both sides. This makes the whole process secure and gives both sides a decent guarantee that a deal goes smoothly. However, this won’t guarantee you from at least an attempt to trick you, if you are lucky enough to come across a certain con artist. My very first crypto seller on Paxful has given a nice try to scam me.

Let’s be friends

While you can choose for over 300 payments methods while buying crypto on Paxful (and the majority of these methods are something I haven’t ever heard of), many sellers still offer very common methods of payment like PayPal, for example. Most likely, with a small twist:

Friends and family‘ payment option in PayPal literally means what it says. It is intended to make money transfers to someone you know (friends and family), and you don’t pay fees as with an e-commerce related payment. Of course, friends will be friends, so you cannot dispute this payment anytime later.

Friends. Source: cinemablend.com

Yes that’s right, there’s no buyer protection unlike with ‘Goods and Services’ payment so you cannot later open a dispute for whatever reason. So, it is solely up to you whether to use this option with strangers and without an intermediary (hint: don’t!)

My Paypal has been limited

So far, I picked up a a sell offer with a nice discount and PayPal payment option; friends and family indeed, but as soon as there’s a clearing intermediate, this doesn’t look careless. Quick chat with the seller, and I made PayPal payment of 200 EUR to him, confirming it with ‘PAID’ button.

Oops.

Now how nice is that! Well, remember that bitcoins from his side are actually held in escrow since I opened a deal, so he is not to just run away with my money to make a fraudulent profit. But the try is nice, he says he ‘denied’ the payment, of course being not able to present a screenshot. But the actual scam attempt is yet to follow:

What he says here is that I should cancel this trade (which has been paid already by me), and then open a new one and mark it as paid without actually paying. This is a one-way to lose money because:

  • My payment already shows as ‘paid’ in PayPal, so it has definitely reached the recipient.
  • My payment is irreversible and cannot be disputed in PayPal (friends will be friends).
  • If I cancel already paid deal this way, the bitcoins in escrow are released back to the scammer.
    Paxful marketplace rules explicitly warn not to cancel the deal which has been paid already.
  • I am opening another deal and marking it as paid without actually paying, thus interfering with Paxful trading policy.
    Paxful marketplace rules explicitly suggest to confirm the payment only if it has been actually made, not otherwise.

As a matter of fact, exactly the same scam scheme (but involving gift cards as an example) is already described in Paxful help section! However, how much time one spends reading documentation.

Not yet the end of a story! In just a few hours after opening a dispute scammer’s PayPal magically started working again! He is still not happy that he received a bit less than expected 200 EUR (even if he claimed he ‘denied’ it before, oh that’s pure magic):

Ever heard of currency exchange rate fluctuations?

Lessons to be learned

So far so good, the dispute was obviously won and I got a handful of satoshis with a nice discount for the price paid. Also, con artist has been banned from Paxful for his misbehavior.

When it comes to common payment methods, one should know the limitations of those, so situations like this won’t turn surprise because suddenly there’s no way to legitimately claim the money back. As a rule, don’t ever make ‘friends’ payments to strangers online at least without being guaranteed by escrow service or any other sort of an intermediary.

Also, never allow a stranger to talk you into such a scheme where you find yourself in a losing position. Following the rules of the marketplace is a key concern so that you gain and not lose.

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