Third Party Scams

Recently I met a person who was caught in a third party scam while trying to buy the crypto currency USDT and lost $15,000. It was 6 months worth of his savings. Among the people I know, including myself, there are quite a few of us who got caught up in this type of scam.

Some of us want to exchange foreign currency, some of us wish to buy crypto currency. Official channels through banks or financial institutions either do not support the transaction (for example I want to exchange my local currency to Chinese RMB in Alipay / Wechat to pay for my online purchases) or simply has exorbitant fees. Of course, for the case of crypto currency, the countries of the world are split into for and against it. While few go to the extent of China’s outright ban, many countries who oppose it simply make it difficult to obtain it with all their restrictions.

So how does third party scams work? Since crypto currency is not familiar to all, we will use the example of exchanging a currency to another.

For example I hold USD. I need Chinese RMB in my Alipay account. Alipay is like the China’s version of Paypal, with which you can use it to pay for most purchases within China. Wechat is like the Whatsapp of China, with a wallet function which you can also use to pay for most purchases in China. Now I am not in China, so in order to make purchases in China, I will need money either in my Alipay or Wechat. Most of China still do not accept credit cards.

Banks also do not support this type of transaction as they only do bank to bank transfers. So I can only look for private sellers of Chinese RMB who have the flexibility of depositing RMB into my Alipay or Wechat accounts in exchange for my USD (or any other currency which you are dealing with). Private sellers also usually offer a better exchange rate compared to banks.

Now into the example:

I post an online advertisement saying I want to change my USD to RMB.
Person X contacted me and said he will sell me RMB for USD.
At the same time X talked to Person Y who is doing such trades and said he will buy his RMB with USD.
X got Y’s bank account number and gave it to me. I will think this is X’s bank account number.
I made the payment into Y’s bank account and informed X that it is done.
Y received the money and thought it was X who transferred him the money.
Y proceeded to send RMB into X’s account.
X disappeared.
As I did not receive the RMB I paid for, I reported the matter to the police with Y’s bank account number.
Y was arrested by the police. Of course, after investigation, they will realise Y is also a victim.
But, as Y’s money are proceeds from a crime, his bank account will be frozen until further notice.

While smaller countries like Singapore generally allows the convenient option of meeting up, bigger countries may not have such flexibility. But if your country is not as sparsely populated as New Zealand, there are generally still people doing such crypto or foreign currency trades in your local area, even though it may mean travelling a little longer just to meet them. Granted, there are certain platforms which allows the convenience of trading online, but they are not 100% safe either. For crypto, Binance P2P is also susceptible to such scams, and I have known people who fall for it even on this well-known trusted website. Afterall, it is not Binance who scammed you, but the users using the platform.

Where possible, always meet up face to face. Reduce the unnecessary risks. You do not want your hard-earned money to go flying away and you ending up at the police station where nothing gets done. But take note, even for face to face meet up, third party scams can still be done.

In the first paragraph, I mentioned that the person lost $15,000 to the scam. This is a real life example I came across.

He conducted his transaction face to face. But the person he was dealing with said he was busy and will be sending his worker to conduct the transaction on behalf of him. The scammer told the other party the same thing. In this case, the transaction was for crypto currency USDT. Buyer (the one who lost $15,000) was trying to use his cash to buy USDT, and of course the seller was trying to sell his USDT for cash.

Both buyer and seller met up, thinking that the other party was the scammer’s worker. The scammer told both parties not to say much to each other when they met up due to privacy issues – not wanting the worker to know too much about the boss’ transactions. When both buyer and seller met up and the buyer counted the cash, the buyer proceeded to send the money to the scammer. At this time the buyer was either stoned or not alert enough, he did not say anything when the seller said he will be sending the money over now (to the scammer). At this point in time, he still has not given the seller his USDT wallet address, yet he did not question the seller when he said he will be sending the money over. When the scammer received the money, the Telegram chat with the buyer and seller was deleted immediately and he disappeared, leaving the confused buyer and seller on the spot.

Note that the thing about crypto currency is that once the money is sent over, it cannot be recovered. That is the beauty and the dangers of crypto currency. People also use cash for a variety of reasons rather than bank transfers even for face to face meet-ups, not necessary because it is dirty money. Reasons may be that some are conducting legitimate business on the side but the banks keep questioning the volume of transactions under the pretext of anti-money laundering, or people trying to mask their transactions to avoid taxes or simply to do transactions in places where crypto currency is banned. This is the issue – people use cash and crypto to transact so they cannot be traced. Yet for this exact same reason once a scam succeeds, it is near impossible to get the money back.

Yes you may have heard of hacking incidents of crypto wallets getting busted, or that the FBI cracked down on a syndicate which uses crypto currency to conduct their financial transactions. But no FBI or police will bother to take up your case if it does not affect insane amounts of cash (10 million is not an insane amount, just to set a reference bar) or if it does not involve a big enough crime on the levels of international syndicates.

The buyer tried to negotiate with the seller to split the losses 50-50, but the seller refused to budge. Maybe in places like America, the buyer may well pull out a gun and force the split, but in peaceful countries where you do not carry a weapon around, there is no way you can physically force people to hand over you the cash. That will be robbery.

The buyer tried to convince the seller that both are victims of scams. But the seller said one thing – the mode of operation and the checks for the buyer and seller is slightly different. Buyer immediately understood and needed no further explanation. To elaborate, the seller had counted the cash, deemed it correct, kept the money before transferring the money. The seller may not have been smart enough to detect the scam, but he had a passable grade – he successfully safeguarded his assets. If the seller had sent the money before counting the money and safe-keep it, it will be the seller’s negligence. For the buyer, he needs to ensure that the person receiving his money is the one giving him the intended goods (in this case, USDT). He also needs to make sure that the seller cannot run if anything goes wrong.

There was nothing the buyer could do but to walk away empty-handed with a loss of $15,000. Both understood that if the situation had been reversed, buyer will also not budge and share the loss. In this reality, all parties have to do the necessary checks and safeguards for themselves. Anyone who fails to sufficiently do it and got scammed has to take all the losses for himself. Nobody will share their losses with you out of moral obligation, sympathy or compassion. I did my checks, you did not. You have to suffer the consequences of your lack of due diligence.

This is not a friendly world. Always be alert. Take no chances. When dealing with others for transactions of such nature, never involve a third party. Always confirm things with the one right in front of you.

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