Binamite Content Wizards

September 13, 2023

Indian P2P Scams: Why, How, and What Now

Indian P2P crypto scams

The world of digital assets and cryptocurrencies has always been abound with scams. This time, the Indian crypto community is facing a double whammy from the scammers and the government.

The Indian crypto story so far…

The sale and purchase of crypto have always been complex due to the Government of India’s orthodox stance towards the sector. Thus, despite the Supreme Court’s judgment in 2018 striking down the central bank’s circular banning the sale and purchase of crypto, the banks are wary of servicing their crypto-friendly customers. 

However, despite these hurdles, Indians do not seem to be giving up. Between 2017 and 2022, the Indian crypto market clocked a 760% increase in participants taking the number to 134 million. Moreover, a study by Statista states that the number is well on its way to 150 million by 2023 end, chasing the $3.3 billion in profits up for grabs for the industry in 2023, expected to reach $6 billion by 2027! No doubt the steam is not running out.

These 150 million users need a secure channel to buy and sell crypto, and the hostility of the traditional banks and payment gateways’ towards the industry is making things worse. Because the banks are servicing the exchanges, on-ramps, and off-ramps, they do not have their own channels to take your money and send out crypto or vice versa. In the absence of safe channels, the Indian crypto community has taken to the peer-to-peer(P2P) method of buying and selling crypto.

What is the P2P method of selling and buying crypto?

In the P2P method, the responsibility of the platform is to connect buyers and sellers who agree on a price, and the assets/money is transferred directly between them. The use of this method has been on the rise due to absence of proper channels. 

How do the P2P scams happen?

P2P scammers’ tactic involves a series of orchestrated steps to defraud these  two kinds of victims:

  1. Crypto seller
  2. Fiat transferer

Step 1: First these crypto P2P scammers deceive crypto sellers by initiating a transaction to purchase cryptocurrency from them. But this transaction is not initiated from their own account, but the account with bank details of a victim. This is a result of stolen or leaked financial data. 

Step 2: Once the seller has accepted the request, the scammer now starts playing on both sides. He will be in touch with the victim asking them to send the money to the seller’s bank account.

Step 3: But why will anyone just send money to someone? Well, that is the other part of the scam where the scammer has convinced the victim (buyer) that once the money is sent, they will receive the crypto that they wish to buy.

Step 4: Once the buyer victim is satisfied, they end up sending the money directly to the seller’s wallet. The seller receives the money, seemingly completing the payment process. However, the money that was sent belongs to the poor victim whose bank account was hacked by the scammer.

Step 5: Thus, the buyer sent fiat, and received no crypto. They sent the funds to a genuine seller, who sent the assets to a scammer, and not the buyer. The buyer gets angry and reports this to the police. The police check the receiving bank account and freeze the account which belongs to a genuine seller, and not the scammer. So the seller has sent the crypto and received the money, but their account is not frozen. 

Here, the scammer is actually duping two individuals without involving his personal bank account.

How to stay safe from P2P scams?

  1. Stop using P2P: The system is fraught with broken fiat and crypto rails that can be exploited. It is better to use exchanges or crypto buy and sell platforms like Binamite. These services have dedicated support teams, and you interact directly with the company, unlike P2P.
  2. Document every step: Save the messages, emails, and screenshots of transactions for an end-to-end trail of the process. This will come in handy if you lose money, or if your bank accounts are frozen.
  3. Take your time: No matter how much of a hurry the scammer is in, take your time to confirm that the money has reached your bank. Don’t rely on screenshots as they may be fabricated. Only after the receipt is confirmed should you allow the crypto to be released from escrow. 
  4. Communicate safely: Whenever feasible, restrict your communication with the counterparty strictly within the P2P platform where the transaction is taking place. Engaging in conversations through external channels creates an opportunity for scammers to manipulate the situation.

The best way to avoid P2P scams is to avoid the system altogether. Today, there are substitutes like exchanges and fintech platforms like Binamite that let you buy and sell crypto without any risks of scams and fraud. So why take the extra trouble?