Scams 103: Man in the Middle, MITM, Triangle, 3rd Party

Man in the Middle (MITM, MIM), Triangle or 3rd party scams are all closely similar in how they work. Sellers on Localbitcoins.com have reported quite a few incidences of MITM scams. In this example scenario we have the seller (you), a buyer (scammer) and the victim (dumbass). It’s a fairly simple route taken to begin this scam. Your ‘buyer’ will troll around the internet attempting to trap people into this scam. They might be offering goods for sale, apartment rentals, and in some cases convince people via phone that a family member needs bail money etc. Pretty much anything goes. Then the ‘buyer’ will request that the ‘victim’ make a partial or full payment via cash deposit to a bank or buy a moneycrack. Any payment method can be subject to a MITM but it appears that cash deposit is the most common.

So now the ‘buyer’ has hooked a fish (perhaps even phish) and the next part of the scam begins. The ‘buyer’ heads over to localbitcoins.com and opens an order with the ‘seller’ to buy coins for cash deposit. Using the account information they’re provided, the ‘buyer’ in turn gives the ‘victim’ the ‘sellers’ bank information to make a deposit. The ‘victim’, believing they’re renting an apartment or buying sex toys, makes a deposit to the ‘seller’s bank account. Once that is completed the ‘buyer’ will mark the ‘seller’s transaction as paid. The ‘seller’, if they’re none the wiser at this point, will release the coins to the ‘buyer’. The ‘seller’ believes all is well and the ‘buyer’ now exits the scene with BTC; never to be heard from again.

Now the fun begins. It won’t be long before the ‘victim’ realizes they’ve been scammed and runs back to the bank to get their money. The bank will reverse the credit from the ‘seller’s bank account and return  it to the ‘victim’.  The ‘seller’, as the owner of the account, will be suspected of perpetrating the scam against the victim; most likely will have their account frozen or closed. In essence the ‘seller’ has now become the final ‘victim’ in this scam.

So what can be done to protect yourself? As the ‘seller’ there are several things you can do. Your best weapon is not releasing the escrow until certain conditions are met. Keeping your coin safe is certainly better than losing both coin and fiat.

• A majority of the time the ‘buyer’ account is new or has no trades. You can limit your trades to only deal with established ‘buyer’s or limited amounts for the new ‘buyer’s. Hold escrow release for new ‘buyer’s for 24 hours after the deposit is made. The period is usually enough time for the ‘victim’ to realize they’ve been scammed and claim their money back. At least then you haven’t lost your coins.
• Always always require a pic of the bank deposit slip! Make sure it reflects the correct date and account number. Additionally you should require the ‘buyer’ to write certain information on the face of the receipt before sending a pic to you. For example: “Deposit is for purchase of bitcoin from ‘seller’ to ‘buyer’ via localbitcoins.com” along with the reference number from the LBC transaction. A few ‘seller’s at localbitcoins have been requiring a 5-10 second video of the receipt.
• Stick to your guns! Do not allow a ‘buyer’ to give you some excuses about why they cannot follow your directions exactly as you require.

The objective is to ensure as much as possible that the ‘buyer’ actually has the deposit slip themselves and not the ‘victim’. Requiring certain and particular information to be written on the bank deposit slip may make the ‘victim’ think twice about what they’re doing and make things more difficult for the ‘buyer’ to explain.