How bitcoin sellers are defrauded at localbitcoins.com

[Tungsten]

I posting it after getting no help from localbitcoins.com and no responses from the buyer. They holding my bitcoins hostage at "escrow" while buyer shopping/waiting for the best price.

And so after numerous good faith attempts to resolve this issue with both buyer and localbitcoins.com exchange (which actually has a great interface and quite user friendly) I have to post it here to attract attention to localbitcoins' quality of support and policies that hurts sellers.

So here's how you (seller) can be screwed. Say, you want to sell a few bitcoins. You transfer bitcoins to localbitcoins.com wallet.
You post an ad to sell at localbitcoins.com at a certain price point.

So here is a technique fraudulent buyers (sorachi11 in my case) are using:

• He goes to "buy bitcoins" section, clicks "Buy" on your ad and then "send trade request"
• At this point your problem begins: localbitcoins.com transfers bitcoins from your wallet to their "escrow" account. Which means there is NOTHING you can do unless buyer pays (which is not going to happen) or 48 hours or so passes
• Seller sends you a few PM's about "payment in progress" BS and then goes to buyers section and opens an ad to purchase bitcoins at a lower price point.
• You do not receive timely (like 10 hours after) payment from buyer and open ticket with localbitcoins.com
• In a few hours - you get a reply (actual reply here): "Since the buyer has been active yesterday, it's best to wait a little if he'll respond. Normal dispute process can be started 48 hours after payment has been marked complete"
• Now you realize that you're out of your bitcoins for at least 48 hours, while fraudster is checking the market prices for the best opportunity: if price of bitcoins goes high - he (with the help of localbitcoins.com) is holding your funds hostage at a fixed price level. If price goes lower - he'll buy stuff from someone at a lower price point.

Fraud bonus tip: No one prevents fraudulent buyer to open a few different accounts with different emails and freeze assets of a number of sellers, effectively locking them out of fast changing marketplace for 48 hours.

At this point, after more than 35 hours passes since buyer froze my bitcoins at localbitcoins's escrow - i get neither any response from buyer, nor any other response from localbitcoins (besides the one listed above) nor access to any of my bitcoins.

I hope that eventually i might get my bitcoins back and so that other sellers would be beware of my experience.

[n4ru]

Good enough reason for me to stop using localbitcoins.com.

[coqui33]

I do not understand. I conduct 10-20 BTC sales per day on LBC via bank cash deposit. Out of those, three or four buyers per day fail to make their deposits within the 90-minute count-down. On such occasions the system automatically cancels the order and returns my escrow to me. That's 90 minutes, not 48 hours. That's automatic, not by registering a dispute. Are you on the same localbitcoins.com that I am on?

FYI, here is my seller info:

Join localbitcoins.com and buy bitcoins with cash deposit to your local bank:

For Bank of America, Wells Fargo, Citibank, or Regions Bank, visit https://localbitcoins.com/ad/15776/?ch=4ja

Immediate. Reliable. Anonymous.

See detailed instructions at
http://backintyme.com/depos.php

[Tungsten]

I do not understand. I conduct 10-20 BTC sales per day on LBC via bank cash deposit. Out of those, three or four buyers per day fail to make their deposits within the 90-minute count-down. On such occasions the system automatically cancels the order and returns my escrow to me. That's 90 minutes, not 48 hours. That's automatic, not by registering a dispute. Are you on the same localbitcoins.com that I am on?

Here's how it worked:
- Buyer marked payment as complete via interact e-transfer. Once he marks payment - your bitcoins are frozen.
- Buyer quickly cancels his interac payment (it takes ~20-40 minutes to reach you).
- I receive interac notification but deposit fails (because it was cancelled).

PS: in fact no one prevents buyer from marking payment as complete without doing any payments at all.

Here it goes.

[Xin Zhao]

I do not understand. I conduct 10-20 BTC sales per day on LBC via bank cash deposit. Out of those, three or four buyers per day fail to make their deposits within the 90-minute count-down. On such occasions the system automatically cancels the order and returns my escrow to me. That's 90 minutes, not 48 hours. That's automatic, not by registering a dispute. Are you on the same localbitcoins.com that I am on?

Here's how it worked:
- Buyer marked payment as complete via interact e-transfer. Once he marks payment - your bitcoins are frozen.
- Buyer quickly cancels his interac payment (it takes ~20-40 minutes to reach you).
- I receive interac notification but deposit fails (because it was cancelled).

Here it goes.

Over 60btc transactions on local and never once have I ran into this. Unlucky I guess.

[botsofbitcoin]

I've been selling on Local Bitcoins for months now and have had very little trouble, barring the occasional time when my coins have been tied up overnight while banks carried out security checks.

It seems to me that this is an argument for not accepting payment types that can be cancelled so easily, and also for only dealing with people who have reputation to lose. There are plenty of new features, and promised ones forthcoming, to make it easier to avoid accepting a deal with someone you'd rather not deal with.

[coqui33]

Here's how it worked:
- Buyer marked payment as complete ...

Ah. Yes, I see now. I have had only one occasion when a buyer fraudulently claimed he had paid, thus locking the escrow. Eventually, I persuaded him to cancel the order. I guess I have been lucky.

On the other hand, if it were to happen, since I accept only cash handed to a bank teller (no transfers, no checks), I would expect the admins to ask the buyer for an emailed image of the bank teller receipt. If he cannot produce it, I would expect my escrow to be returned immediately.

 

[Tungsten]

Here's how it worked:
- Buyer marked payment as complete ...

... I would expect the admins to ask the buyer for an emailed image of the bank teller receipt. If he cannot produce it, I would expect my escrow returned immediately.

Exactly were my expectations as well. I even sent email to their support stating that I'll make a post HERE if they'll keep ignoring the issue.
I guess no one is reading tickets on the other end ...

[coqui33]

Have you brought the issue up in the LBC forum? If not, do you mind if I bring it up?

[Tungsten]

Have you brought the issue up in the LBC forum? If not, do you mind if I bring it up?

I made a one-liner post here:
https://localbitcoins.com/forums/#!/fraud

That's it for now.

[kangasbros]

Hi, there is the "first-time buyer limit" in the advanced section on the advertisement form, which can help you from these cases. Then you can specify a coefficient as it goes up with volume.

We are also developing other solutions to fix this problem.

[kangasbros]

Also, I don't see how it would be a way for buyers to "squeeze" better prices. It might be competitors doing this, to get your ads away, but I don't see how the buyers would benefit from this.

[SurReality89]

you should still be careful of scammers on localbitcoins, i always do sales that i can afford to get ripped off on. for large sales i choose to split the sale into multiple smaller sales and do them one at a time.

i pretty much only sell on localbitcoins, the second sale (attempt) i did there was with someone i met here (tigerguy007, same name on local) and the person claimed to have paid but did not. the person stopped responding after escrow was funded and claiming to be "scratching the moneypak will get you the code in seconds" while hours later never got me a code or any sort of communication.

as if a pathetic attempt to trick me into releasing escrow first... i immediately started worrying about someone giving me a fake code, or a code that was already loaded or didn't have enough money on it... so i contacted support with my question of how they would handle situations like that, this was my response:

It is true that moneypak cards do not offer too many possibilities to prove that the:

1) Card has sufficient amount of USD available
2) The card was not stolen.

If the buyer is able to provide the receipt of the card and the location where it was bought, it is fairly good assurance. Also, you can always take a screenshot when loading the card to show that there were not enough money. You should note that the buyer is obligated to prove that the payment was completed succesfully, and your trade history will be taken in consideration when we resolve this kind of issues.

Frankly, moneypak trading is mostly based on trust, since moneypak cards are not meant to be used that way. If you want to make sure that you won't be screwed, you should only trade with trusted users.

[joesmoe2012]

This is called hedging and is strictly against LBC's TOS. If you email support with the transaction number of hte person doing this, the price will be modified to the price of when the payment was actually made.

I have had this happen numerous times.

Love LocalBitCoins, their support has ALWAYS resolved things to my satisfaction and usually in a timely manner.

[MPOE-PR]

I posting it after getting no help from localbitcoins.com and no responses from the buyer. They holding my bitcoins hostage at "escrow" while buyer shopping/waiting for the best price.

And so after numerous good faith attempts to resolve this issue with both buyer and localbitcoins.com exchange (which actually has a great interface and quite user friendly) I have to post it here to attract attention to localbitcoins' quality of support and policies that hurts sellers.

So here's how you (seller) can be screwed. Say, you want to sell a few bitcoins. You transfer bitcoins to localbitcoins.com wallet.
You post an ad to sell at localbitcoins.com at a certain price point.

So here is a technique fraudulent buyers (sorachi11 in my case) are using:

• He goes to "buy bitcoins" section, clicks "Buy" on your ad and then "send trade request"
• At this point your problem begins: localbitcoins.com transfers bitcoins from your wallet to their "escrow" account. Which means there is NOTHING you can do unless buyer pays (which is not going to happen) or 48 hours or so passes
• Seller sends you a few PM's about "payment in progress" BS and then goes to buyers section and opens an ad to purchase bitcoins at a lower price point.
• You do not receive timely (like 10 hours after) payment from buyer and open ticket with localbitcoins.com
• In a few hours - you get a reply (actual reply here): "Since the buyer has been active yesterday, it's best to wait a little if he'll respond. Normal dispute process can be started 48 hours after payment has been marked complete"
• Now you realize that you're out of your bitcoins for at least 48 hours, while fraudster is checking the market prices for the best opportunity: if price of bitcoins goes high - he (with the help of localbitcoins.com) is holding your funds hostage at a fixed price level. If price goes lower - he'll buy stuff from someone at a lower price point.

Fraud bonus tip: No one prevents fraudulent buyer to open a few different accounts with different emails and freeze assets of a number of sellers, effectively locking them out of fast changing marketplace for 48 hours.

At this point, after more than 35 hours passes since buyer froze my bitcoins at localbitcoins's escrow - i get neither any response from buyer, nor any other response from localbitcoins (besides the one listed above) nor access to any of my bitcoins.

I hope that eventually i might get my bitcoins back and so that other sellers would be beware of my experience.

You certainly have a point here, basically site is extending overnight loans on your capital which people can certainly use to turn a profit arbing.

[coqui33]

When a buyer claims to have made a bank deposit but the seller does not see the deposit, LBC admin should require the buyer to present an image of the bank teller's cash receipt. If the buyer cannot do this, LBC admin should return the escrow to the seller. If the buyer presents an image of the receipt, LBC admin should release the escrow to the buyer (and the seller must sort it out with his bank).

I suggest that everyone, including LBC admin, would agree with the above policy. Where people differ is in the timing.

Timing 1 -- How long after a sale is marked paid but the seller has not seen the money should LBC admin demand a receipt image from the buyer? As I understand current LBC policy, 24 hours must pass before any admin involvement. Personally, I think this is too much. Either the buyer made the deposit and has a receipt or he did not and does not. This is knowable within minutes. A 24-hour wait will not change things.

Timing-2 -- How long after LBC admin makes the above demand does the buyer have to photograph and email the receipt? Giving the buyer another 24 hours (adding up to 48 hours in all) seems a bit long to me, but I could be persuaded that some buyers need a few hours to take a picture and email it.

 

[Tungsten]

So now it's more than 49 hours passed since my bitcoins were put on escrow.

• The buyer (sorachi11) still did not pay, although responded with this PM: "shit sorry, are you here?". This is likely a "keepalive" PM to show localbitcoins that he is "active". Which, in turn, will be an excuse to keep holding my bitcoins allowing fraudster to play his arbitrage game.
• Localbitcoins.com still holding them in their "escrow" playing the buyer's game on me.
• I replied to both seller and localbitcoins.com with no results.

Here's another enlightening reply I got from localbitcoins support:
"Hello,
I understand your frustration, but the other side of the coin is that if we release coins to seller quickly for legitimate-seeming buyers it opens that side for fraud. Patience is king here.
You can mitigate your risk by having low limits for public, possibly hostile buyers. Bigger deals you can provide for known-reliable traders using a trusted only ad.
Br,
Leo"

[johnblaze]

You certainly have a point here, basically site is extending overnight loans on your capital which people can certainly use to turn a profit arbing.

indeed

this is very bad practice

[botsofbitcoin]

Regretfully I've now had to set a limit of 0.1 BTC for new buyers since this seems to be the new big thing on Local Bitcoins. I currently have all my remaining coins tied up on three separate OKPay deals, mostly from accounts with no history (one has a single trade). It's a real shame as I like to try and accommodate new buyers - that's really what Local Bitcoins should be about.

I do think that if someone has marked the deal as paid then 24 hours is too long for instant or near-instant payment methods. Bank transfers in the UK shouldn't take more than 12 hours, even with security checks - but I can see why 24 hours is reasonable for that method. OKPay should be instant though. In fact with my automatic ads, if they've really sent the funds to my OKPay wallet they'll already have the coins by the time they come back to mark it as paid. If I have to have any involvement at all, they've marked it paid without actually paying, and as far as I'm concerned that's scamming behaviour.

[joesmoe2012]

So now it's more than 49 hours passed since my bitcoins were put on escrow.

• The buyer (sorachi11) still did not pay, although responded with this PM: "shit sorry, are you here?". This is likely a "keepalive" PM to show localbitcoins that he is "active". Which, in turn, will be an excuse to keep holding my bitcoins allowing fraudster to play his arbitrage game.
• Localbitcoins.com still holding them in their "escrow" playing the buyer's game on me.
• I replied to both seller and localbitcoins.com with no results.

Here's another enlightening reply I got from localbitcoins support:
"Hello,
I understand your frustration, but the other side of the coin is that if we release coins to seller quickly for legitimate-seeming buyers it opens that side for fraud. Patience is king here.
You can mitigate your risk by having low limits for public, possibly hostile buyers. Bigger deals you can provide for known-reliable traders using a trusted only ad.
Br,
Leo"

Contcct local bitcoin staff, they will require proof of payment, they will use the date and time from the payment to calculate the rate per your formula. don't worry, the buyer may think he's slick, but in the end he will pay the rate as of when the payment was submitted.

Contact support staff and say that he was "hedging" (or just click start dispute and type in the communication box that the user is hedging.