Recently some German fellow got himself swindled out of a couple hundred Bitcoins. This sort of thing happens all the timei and so you'd expect by now nobody cares. Well... somehow I do. It may be the guy's considerate and polite demeanor or the incredible complexity of state-sponsored fraud that ended up putting him in the spot but nevertheless I do care.
So, for the benefit of well meaning, reasonable if somewhat naive gentlemen in Germany and everywhere, let's consider his story and draw some correct inferences as to the future :
I was scammed last week for a fiat amount of 22k USD! I sold BTC on a p2p exchange accepting german bank transfer and it took not long time for getting the first offer of a smaller number of around 30 BTC. As I know that fraud is a big topic by trading on #bitcoin-otc I tried to get as much informations I could get from the buyer! He told me that he is buying BTC for his german clients from whom he provided the phone numbers so that I could talk to them to be sure, which I did immediately! After I felt more comfortable with the trade I agreed and received the amount for the first 30 BTC very quickly on even the same day! I released the escrow and was looking forward to the next deal with him! This time he wanted to buy around 80 BTC. After calling the number of his client I agreed to make the trade and the day after I received the amount on my bank account. This time to be even safer I phoned the bank to authorize the transfer to be safe because of potential chargebacks! The employee told me that I can be safe and that no chargebacks are possible after I see the money on my bank account. ( I even have a proof of this statement, because I recorded the phone call). After this I was even more comfortable and was ready for the next trade with around the same volume of 80 BTC. I asked him then to please provide me a proof of payment, so that I can be sure that I will receive the money on the next day! After that a really strange thing happened! He sent me the login data for his clients online banking account and told me I should just log in and check for a proof! This was completely suspicious to me and I immediately decided to go to the police the next day... Then everything changed...
Next morning I woke up and received directly a phone call from my bank that my account was frozen because I am accused of phishing! The buyer of the first trade accused me and claimed the money back, which was then charged back immediately without my agreement!
The first important point is that you don't establish trust by talking. There exists this widespread notion that it is both reasonable and beneficial to "get to know your counterparty" and that such a process will or at least in principle could work so that you use it to eliminate counterparty risk. This notion is completely wrong, in the same exact way the entire "I'm going to go to his home and do something about it"ii stuff is completely wrong.
It is true that for low value intangible benefits, such as being accepted on a webforum for instance, a phone interview will work wonders to clear up any possible sticking points. As the value of the benefits climbs and their tangibility soars this method breaks apart however. The low value is crucial, as nobody is going to go to the trouble of taking calls fraudulently for a stick of gum. The intangibility of the benefits is crucial, as if they're tangibleiii they're transferable which means someone somewhere will figure out a way to bundle them and extract whatever little value they may have by industrial processes. Once either of these required elements is taken away the "getting to know the CP" simply opens you to social engineering. And if there's something scammers are really, really, really good at, that's it : social engineering. This is what a scammer is, fundamentally, the dog that cries like a hurt puppy not because it's a hurt puppy, but because it likes eating vultures.
This can't be underscored enough : the "getting to know the other" is harmful to you. It's roughly the equivalent of proposing that you'll treat your shopping addiction by watching commercials to "get to know the products better". That's not how it works.
The second point is that banks lie. O yes they do. All the time, to their customers, to their regulators, to their employees, to their shareholders, to everyone and anyone. This is the business model of the fiat bank : lying.
So, while I have no doubt in my mind that the person is telling the truth and the bank clerk told him that his money is safe once in his bank account, it is perfectly untrue that his money is safe once it's in his bank account. SEPA has a 10 day chargeback window, among other things. And yes, there's no doubt in my mind that the bank will manage to avoid responsibility for this intentionally false statement to its customer. The person that made it will probably be able to avoid it too, but whether they will or whether they won't... fiat banks are insulated from the consequences of their actions. This means fiat banks are criminal entreprises whether they want to be or not (especially because even if they "don't want to" they'll have to compete with the others that don't really care).
The third point is that scammers are really devious. That invitation to "log into the account" ? While it masquerades as a perfectly innocent if a little klutzy "here, I show you", it is in fact a deliberate attempt to create evidentiary trail implicating one of the victims of the fraud as a perpetrator of the fraud. A complacent legal system has a cheap way out : just convict this guy on the grounds that "the hacker then made his mistake of logging in from his own home computer which allowed the police to wrap the case". Sure, why not ? Who's to know better ? The scammer has successfully made it cheaper for the law to prosecute the innocent than to pursue the actual perpetrator, which means that he is now extracting value from the functioning of the state as well as from the innocent ignorance of the general population. Do you want to know why scamming is as perennial as weeds ? Because it's so damned adept at making money, that's why.
The fourth point, not included in the victim's discussion other than by the shape left by its absence, is the problem of time. Scammers are always in a hurry as aptly explained by Michael Hendricks. How fast they move is much better a tell than how convincing the hired camwhore sounds on the phone, because this is a fixed constraint. They can't produce more time, even if they can produce camwhores willing and able to say absolutely anything any way you wish to hear it.
Other than these considerations the guy did pretty much everything right.———
- Not quite to the degree it happens in fiat currencies, of course, but then again that's scarcely surprising seeing how Bitcoin isn't one. [↩]
- What pray tell are you going to do ? Break lawful collection laws in your jurisdiction and end up fined ? Break the scammer's legs and end up before a grand jury for assault & battery ? What, pray tell, is it that you're going to do ? Waste some gas and flail your arms at the very most. This may make sense in an emotional perspective, but as long as we're talking business...
As to the moral considerations involved this older discussion of the topic covers that nicely :
The only way violence works in the frame you wish to use it is as a manifestation of dominance. If you could beat up pirate with impunity and regularity (such as the state does) then maybe. Otherwise, hit and run affairs… he’ll just count himself wronged.
- Bear in mind that in this context "tangible" and "intangible" are terms of art with a certain definition, as explained here. [↩]