By Mary Purpari
Due to limits placed by international banking on trading with Cryptocurrencies, in addition to a lower volume of trade on exchanges, people are trading more and more on Peer-to-Peer exchanges. LocalBitcoins is one of the most popular of these P2P exchanges.
Despite LocalBitcoin being one of the most highly used Peer-to-Peer exchanges in the world, it is also one of the platforms that is most easily accessed by scammers; scammers are able to bypass security in order to reach exchange users.
The following story regards a LocalBitcoin exchange user who was almost cheated out of nearly 2 bitcoins through an elaborate scheme involving SMS spoofing, evidence tampering and just plain lies to the LBC administrators. The user and his Bitcoins were saved at the last minute thanks to an alert observation.
Advice on how to avoid similar events will be included during the progression of the story, in order to ensure safer trading on LocalBitcoins.
Table of Contents
The Scammer Requests a Trade
This story is about Erik*. After placing an ad on LBC for the sale of 2 XBT — approximately 10,500 USD — Erik received a request for a trade from a user named Shoibsheikh786, whose account has since been suspended.
Because the user was new to the site and had not received any feedback, Erik was reluctant to conduct business with him. Unfortunately, there is a rule on LBC that if a prospective buyer offers a trade request, said trade can’t be closed by the seller and, therefore, Erik was left without a choice.
We advise you to set up precise guidelines when offering a trade such as a limit to how much you are willing to sell to a new buyer, a Minimum Feedback Score, as well as security means like Identity verified or SMS verified people.
Detail Verification by Seller
Requesting legal proof of ID from the buyer, Erik realized that the IP address, phone number and passport presented as ID proof were all issued from different countries.
There were, of course, several warning signals here: the buyer spoke fluent English, but his passport was from a non-English speaking country, the name on the passport was not the same as the LBC user ID, and the phone number was from yet another country. Unlike many international P2P exchanges, LocalBitcoin doesn’t allow the seller to rescind trade requests.
The Beginning of the Scam
Having verified the buyer’s ID, Erik requested that he send the funds to his bank account. In response to the request, the buyer sends a screenshot showing that the transfer has already been made.
The screenshot showed that 10,500 USD had been sent to the account of a person that had absolutely no connection to Erik. The buyer initiated a dispute stating that despite Erik having received the funds, he wasn’t transferring the XBT.
Initiating a Dispute
XBT being sold are generally held in an escrow situation on most Peer-to-Peer exchanges and are therefore not accessible by either party until transfer of the funds (INR) has been confirmed. Since Erik hadn’t received the money, he didn’t confirm having done so on LBC. Because of these two fats, both parties had the possibility of initiating a dispute.
When there is a disputed trade, both sides will be contacted by a site administrator who will verify all proofs and then decide who the BTC will belong to. So, let’s discover what went on after the administrator joined the conversation between Erik and the scammer.
Helpful hint: There are limits on how much can transferred both locally and internationally unless the transactions take place inside the same banking institution. Had Erik known this, he could have taken advantage of it, since this transaction was way above the legal limit, and saved himself time and worry.
The Scammer Had the Advantage in the Dispute Because of His Fake Proofs
The scammer got his first foothold when the LBC administration entered the conversation in order to resolve the question.
The fake buyer told a story of how he had made an OTC deal with the bank account holder (supposedly Erik; the account was entirely fictitious) where the account holder had given the account number in order to complete the money transfer while asking the scammer to create a LocalBitcoin account so that the trade could be completed.
In order to give weight to his lies, the scammer provided a series of SMS chat records in the form of a video from his phone. The video showed Erik’s phone number, saved as “Fake name BTC”. He then chatted with Erik’s number without Erik’s knowledge. There’s an even more astounding twist to the story further ahead.
Take a peek here.
Our scammer provides SMS chats with the fake name using Erik’s phone number. How could the scammer chat be using Erik’s number without his knowledge?
There is a wide-spread scamming technique called Spoofing with which a person can send an SMS or call any number while using a fake number or caller ID. And that is how the scammer was able to hold a fictitious chat with Erik’s number — through a spoofing. He made a mistake which we will discuss a little later.
Spoofing is legal in several international communities, including the United States of America, unless it used for deliberately fraudulent ideas. However, it is illegal in Erik’s county and the technique is severely monitored. Unfortunately, there are legal loopholes that enable scammers and others to use the technique even in Countries where they should be blocked. Many of these chats seem to come from legitimate sources.
Helpful Hint: Although leaving one’s phone number on LocalBitcoins is a common trend for facilitating trading deals, scammers are more than happy to take advantage of this tendency.
If you receive any messages on WhatsApp related to offline XBT trading, don’t even entertain the idea.
Seller on the Brink of Losing His 2 XBT
Let’s return to Erik’s story. He found himself in trouble because the scammer had proof that he had paid while Erik could not provide proof to the contrary. The scammer had a video and stated that whereas screenshots can be faked, it’s not possible to fake videos. Erik requested more time from the administrator so that he could do research and gather up proof. In preparation for his part of the ongoing battle, he removed his phone number — the major cause of his troubles — from his LBC profile. He also had our scammer send statements.
By then, the scammer had also taken off his phone number and called Erik a liar. Everything got even cloudier. At that point, all Erik could say was that he had no idea who the so-called owner of the fictitious bank account was and obviously couldn’t provide an account statement.
Fortunately for Erik, the administrator decided to grant his request until the following Monday, allowing Erik the necessary time to gather evidence and prove that the scammer was lying. During his research, he made an interesting discovery that provided the key to bringing down the scammer and ruining his plan.
The Turning Point of the Dispute
As he was studying the scammer’s Erik noticed that, while the phone number appeared to be the same as his, it was off by one digit. He challenged the scammer after communicating his discovery to the LocalBitcoin administrator. The scammer apologized and rescinded his trade offer.
Helpful Hints: The inaccurate phone number wasn’t an accident; it was done in the hope that it would go unnoticed. Erik would have had the advantage in the SMS spoof if his correct number had been used, because he would then have had the records and have known that he was being scammed.
Since Cryptocurrency trading is, for the most part, unregulated, traders should be aware and trade only on P2P exchanges with strong security and KYC compliance.
*Erik’s name has been changed to protect the innocent
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