I am a big fan of bitcoin. I think it has a lot of potential. It’s also a magnet for scammers. Here’s the story of how I got defrauded of over $1000 of bitcoin.
Localbitcoins (also known as LBC) is a website for buying and selling bitcoin online. The way it works for the seller to deposit his BTC in an escrow (a 3rd party who holds the goods in an exchange to facilitate a safe transaction). The buyer then sends the money and the seller releases the BTC. In my case, after releasing the BTC, the money transfer was reversed.
I’m a big bitcoin enthusiast and had purchased and mined some bitcoin years ago and wanted to sell it now that the price seemed good. Since my favourite Canadian exchange (QuadrigaCX) had been shut down due to the founder disappearing, I had no verified account anywhere I could use.
I attempted to get verified on Kraken but over a week later no progress was made. Not sure if I’m in a long queue or there’s a bug in their system. Localbitcoins was the last option I had and I decided to give it a shot.
How I got scammed
I initiated two trades with kirby123 for $866 and $500 in Canadian dollars. I assumed that Interac Email Money Transfer was a safe method because it was irreversible (or so I thought).
First red flag was that the user was outside of Canada. This is a warning sign. I didn’t think much of it. This doesn’t mean it’s a scam for sure, but it’s one thing that could indicate a scam.
I then received money from kirby123. Second red flag: The name didn’t match the user’s verified name — KIRBY MAREUS
I accepted the money. A day later the fraud department called me and mentioned that the EMTs were fraudulent. I realized that most likely some innocent person’s money was taken and sent to me. The bank of course refunded the user. I provided all the proof that this was not my fault and blocks were removed so I can use EMTs again. But it was not a fun experience
I contacted LBC support and they asked for proof of the money being reversed, and then they banned the user
This user has done 5–10 BTC of trades, which is quite a significant amount. I wonder if they scammed others or if they decided to build trust with legitimate transactions before scamming others like ponzis do. Just because someone was honest 100 times doesn’t mean they will be honest the 101st time. It’s also possible that old accounts with good reputations could be hacked and used by someone else.
I also asked LBC if they could refund the bitcoin, but this user had already emptied their bitcoin by then. So the money was gone.
I have learned from my mistakes and wanted to share some lessons I learned with others in order to help others not be scammed like I was.
Safe trading tips
- If its too good to be true, it’s too good to be true. If the price is too high, don’t bite.
- Avoid PayPal or any reversible payment method. EMTs are reversible as well so be careful and stick to trusted sellers.
- Use a clean bank account for deposits. Sometimes in the case of a arbitration you will have to provide LBC screenshots or a stamped bank statement indicating the last 1–2 days of deposits. If you have your personal details in there you won’t want to share this with others.
- Always verify that the sender’s name matches the deposit. If it doesn’t, reject the transfer and cancel the trade
- Start with small amounts to see how the trade goes. Don’t do large trades with unknown sellers
- Check the user’s negative feedback to see if there’s any frauds reported.
- Stick to trustworthy sellers that you have past experience with.
- Try to stick to people in your own country. Even though they can mask this with a VPN and a VoIP number, at least try to be sure you are dealing with fellow Canadians (or whatever country you may be in)
- Remember that there are money laundering laws in place. Laws like KYC (Know Your Customer). Be careful not to be classified as a money transmitting business operating without proper licenses.
- Don’t forget to report capital gains on your income tax.