Peer-to-peer (P2P) trading has grown significantly, offering users an alternative to centralized exchanges. However, it has also become a breeding ground for various types of fraud. Below are some common fraud possibilities in P2P crypto trading:
1. Payment Reversal Fraud
Scenario: The buyer pays for the crypto but later disputes the payment with their bank or payment provider, claiming it was unauthorized.
Risk: The seller may release the crypto before the payment clears, only to find the buyer gets the payment reversed, leaving the seller without funds or the crypto.
Prevention: Always wait for payment confirmation from the P2P platform before releasing crypto. Avoid third-party payment methods and stick to more secure ones (e.g., bank transfers or PayPal).
2. Scams with Fake Escrow Systems
Scenario: Scammers may set up fake escrow accounts, taking advantage of the buyer and seller by never holding the crypto in escrow, thus stealing funds directly.
Risk: Lack of trustable escrow mechanisms makes the entire process susceptible to scams.
Prevention: Use well-known and verified P2P platforms that offer legitimate escrow services. Never transfer crypto without escrow protection.
3. Fake Identity Scams
Scenario: Fraudsters create fake profiles with false identities and provide fake credentials to lure victims into trading.
Risk: The scammer gains trust and convinces users to send funds without valid proof of their identity.
Prevention: Verify the identity of the other party via video calls or third-party verification services before making a large trade.
4. Price Manipulation and "Pump and Dump" Scheme
Scenario: Fraudsters coordinate with others to artificially inflate the price of a lesser-known coin and then sell off their holdings when the price peaks, leaving new buyers with losses.
Risk: New investors are misled into buying a pump coin without knowing it’s a scheme.
Prevention: Perform research on the coin's market history and avoid getting caught in schemes promising unrealistic returns.
5. Fake Trade Confirmation (Bait-and-Switch)
Scenario: A trader may initiate a trade with attractive conditions but change terms after the agreement or after the trade is initiated, causing confusion and financial losses.
Risk: The buyer or seller may not realize the terms were changed until after crypto is released or received.
Prevention: Always read and confirm the terms before proceeding. Stick to reputable platforms where conditions are set clearly.
6. Overpayment Scam
Scenario: The buyer deliberately overpays for crypto and asks for a refund of the difference, often using counterfeit payment methods (e.g., fake bank transfers or stolen credit card details).
Risk: Sellers might end up refunding more than they should, or worse, lose the crypto and the overpayment amount.
Prevention: Always double-check payments, especially if the buyer asks for an overpayment refund. Ensure payments are genuine before initiating refunds.
General Prevention Tips
Use Reputable Platforms: Stick to well-established P2P platforms with strong security measures and user reviews.
Escrow Services: Always use escrow systems provided by P2P platforms to ensure the crypto is safely held until payment is confirmed.
Buyer/Seller Reputation: Check the trading history and reputation of the other party to ensure trustworthiness.
Verification: Always verify payment confirmations and the identity of the trader before releasing any crypto.
Avoid Suspicious Offers: Be cautious of deals that seem too good to be true or offer unusual payment methods.
Conclusion
While P2P trading provides flexibility, it also carries substantial risk due to the absence of centralized control. To stay safe, always verify the other party's identity, use reputable platforms with strong escrow services, and follow best practices for security to avoid becoming a victim of fraud.
