warning: localbitcoins.com rate fluctuation scamming

[eldentyrell]

Hey, I wanted to warn people that localbitcoins.com:

1. Will let BTC buyers / USD sellers hold your coins for 48 hours, with the rate locked in, and then decide whether or not to cancel (they even have an "on vacation" setting for their account!)

2. Does not let new users leave feedback, so buyers can selectively accept

Overall it's quite a nice scam.  I accepted an offer to buy $300 worth of USD in the form of amazon.com gift codes at $358/BTC (at the time gox was around $310 so this wasn't unreasonable).  The exchange rate dropped -- or at least failed to continue its recent meteoric 10%/day rise --  the seller cancelled all his orders and set his account to "on vacation".  I left the most negative feedback possible, but his account still shows "blocked by 0 people, 100% feedback score".

Scam scam scam, just wanted to let others know.  Avoid; you will be giving somebody else a free call/put option on the USDBTC.  I can see how scammers can make a ton of money on this during major price moves.  There is no options market for USDBTC, but if there were, then a call option equivalent to an escrowed no-fee-to-cancel transaction on localbitcoins would easily be worth 5-10% of the transaction amount.  Unfortunately a lot of people may not even realize they're being scammed this way -- they don't actually lose their coins, they only lose the upside of holding them (while retaining the downside).

Until localbitcoins does something to prevent this (like a cancellation fee payable to whichever side escrowed first) they're essentially complicit in the scam.

I also think bitcoinity ought to stop listing them.  Right now bitcoinity consistently shows localbitcoins "bid" way way way above even mtgox, mainly due to these scammers.

[justusranvier]

Were you selling bitcoins, or buying bitcoins?

[eldentyrell]

Were you selling bitcoins, or buying bitcoins?

Selling BTC in order to receive amazon-gift-code-USD.

[justusranvier]

Did you release the Bitcoins without getting paid, or did the buyer just cancel?

I mean, because the buyers in general are pretty flaky.

[eldentyrell]

Did you release the Bitcoins without getting paid, or did the buyer just cancel?

The buyer just cancelled.

I mean, because the buyers in general are pretty flaky.

Yeah, I know, I use craigslist a lot.

The only reason I'm annoyed is that I figured people who flake would accumulate negative feedback; that would prevent a scam like this from working.  Unfortunately localbitcoins.com's feedback system is broken in a way that enables this scam.

If there is absolutely zero penalty for (or record of) flaking you can make quite a nice profit via opportunistic flakery.