How to Identify and Avoid Peer-to-Peer Scams and Fraud

Key Takeaways

Almost every exchange prioritizes user protection and establishes comprehensive, rigorous security measures throughout its ecosystem. 

• Nonetheless, the user is the first line of protection against fraud and fraud. While trading peer-to-peer, it is critical to be aware of the most prevalent scam strategies to spot them.
• Don't label the trade as complete until you've double-checked your account or crypto wallet to ensure that you've received the amounts expected from a P2P trade.
• Take screenshots of all transactions to prove that they were performed.  Also, do not be afraid to report any questionable activity.

Peer-to-peer (P2P) trading allows users to purchase and sell cryptocurrency directly between themselves using their preferred payment methods and currencies. 

Before centralized exchanges, P2P trading was one of the earliest methods users could trade cryptocurrency.

What Are Some Examples of Popular P2P Fraud and Scams?

It's always a good idea to be cautious and not solely rely on the exchange for all security aspects.

The easiest way to protect yourself as a user of any P2P trading network is to be informed of the most frequent scam methods, and better equip yourself to avoid them. 

The following are some popular P2P scams to be wary of.

Fake customer service representative

In the crypto and NFT arena, fake technical help letters are a prevalent fraud. 

For example, suppose you're having technical issues on a well-known P2P network and seek help on a social media site.

In that case, a fraudster may pretend to represent the P2P exchange and offer their aid.

The impersonated customer service representative can then send you to a site that appears to be the actual one and persuade you to input your account information or crypto wallet credentials, leaving them open to theft.

To prevent such fraud, only use an official P2P exchange and double-check the website domain. 

Other fraudsters may send you bogus security warnings about your account through email or text, but the methods are the same. 

Do not click on unfamiliar links unless the source has been confirmed.

Fake receipt scams

While engaging in a P2P deal, it's also critical to double-check the information supplied to you by the counterparty. 

Fraudsters might digitally modify screenshots and say they've fulfilled their end of the bargain, putting pressure on you to do the same. 

If you cooperate with the scammer's requests without first verifying that you have received the monies they allegedly provided, you will most likely lose your money with little possibility of receiving anything in return.

To prevent falling victim to a false receipt scam, always double-check your bank account or cryptocurrency wallet to ensure that you have received the funds that are intended to come your way from a P2P trade. 

The funds will, after that, be released. Never release funds based on receipts only.

Wrong transfer scams

Scams involving incorrect transmission of funds

When a P2P transaction has been completed, a fraudster may attempt to nullify it.

The fraudster may contact their bank to cancel the transaction, stating that the transfer amount is incorrect or that their account has been compromised.

In this case, the seller not only loses their cash after releasing the cryptocurrency but may also be intimidated by not reporting the canceled transaction to the authorities.

To counteract this type of fraud, avoid being frightened by fear tactics and instead acquire proof, such as screenshots, of your correspondence and transactions with the criminal.

Chargeback Fraud

Fraudsters can also use the chargeback option with banks on P2P networks. Once the P2P transaction is completed, the criminal will request a chargeback, claiming they never approved the payment transfer.

They may even argue that the transaction was fraudulent or conducted in error, in which case the initial payment will be revoked.

Similarly to phony receipt fraud, this occurs when the seller rushes to authorize the transaction without first verifying to see if the funds are already in their account.

To prevent falling victim to this type of fraud, make it a practice to save screenshots of your transactions as proof that they were completed.

Contacting customer support to dispute the scammer's chargeback attempts will greatly simplify the appeal procedure.

Scams using Cheques

Bad actors may attempt to transfer money using a bounced cheque, which cannot be cashed owing to insufficient funds on the connected account, or just cancel the cheque after invoicing. 

Binance P2P does not accept checks as a payment option to safeguard our users, as such transactions might be associated with greater risks and uncertainties. 

As a result, users should never accept payment by cheque and should be especially cautious to ensure that their counterparty does not give them a cheque instead of the payment method specified in the advertisement.

How to Avoid Peer-to-Peer Fraud and Scams

Now that we've addressed some of the most prevalent P2P scams, here are a few pointers to help you stay safe while trading peer-to-peer.

Take screenshots

Remember to take screenshots of all your transactions to prove they were done. 

When you file an appeal with the P2P network after being scammed, screenshots serve as main evidence and can assist you in proving your case.

Trade on reputable platforms 

You should only utilize renowned P2P exchanges, such as Binance P2P, where users must undergo an identity verification procedure before trading. 

This greatly minimizes your chances of transacting with a bogus account or someone using a stolen identity.

Moreover, Binance P2P has an escrow service in place that retains the cryptocurrency payments while the transaction is being processed. 

This approach is intended to prevent theft or fraud by establishing an extra layer of trust and preventing bad actors from fleeing with your money without fulfilling their end of the bargain.

Check all transactions twice.

Do not authorize any transfer until you are satisfied that you have received the funds. 

Always double-check your account to ensure that your transaction was successful. 

Most importantly, don't rely on your counterparty for verification because there's always the risk that they'll provide you with doctored proof of payment.

Use only on-platform communication.

Limit any contact with your counterparty to the P2P platform where you are dealing, if feasible. 

Communicating using third-party channels makes it simpler for a fraudster to file a fraudulent dispute against you and deny the transaction that ever occurred.

Contact customer service.

If you cannot reach an agreement with your counterparty, contact customer service for assistance. 

In Binance P2P, the customer support team will respond quickly to any issues you may have while using the site.

If you find this useful, do let me know in the comments!

I will see you next Sunday; till then, SUBSCRIBE to the newsletter and stay healthy.