Peer-to-peer (P2P) buying and selling helped preserve Nigeria’s crypto market alive when the federal government restricted exchanges from transacting with banks in 2021. But, as the strategy has turn out to be extra in style, it has turn out to be a magnet for fraud. Scammers exploit the anonymity of cryptocurrency to launder stolen funds—whether or not from financial institution glitches, hacked accounts, or outright fraud—turning P2P platforms right into a battleground the place merchants should always defend in opposition to threats.

Many merchants, hoping to remain on the fitting facet of the regulation, have arrange guardrails: they refuse giant sums, insist that consumers’ checking account names match their P2P platform identities, and keep away from transactions from third-party accounts. Some even implement a “no Flutterwave coverage,” rejecting funds despatched by fintech fee processors like Flutterwave and Paystack. Regardless of these precautions, fraudsters proceed to search out methods to slide by.

The Dangers of Glitch Cash and Cash Laundering

Considered one of P2P merchants’ greatest dangers is receiving “glitch cash,” monies obtained by prospects who benefit from financial institution technical glitches to withdraw greater than their balances. Different instances, these “glitches” are simply flat-out fraud. Once they occur, scammers rush to maneuver the fraudulently obtained monies by P2P buying and selling earlier than the monetary establishment notices.

Monday Osas Ogbebor, a crypto dealer in Abuja, unknowingly obtained glitch cash from a purchaser who paid by Kolomoni, a fintech app. Shortly after, his financial institution flagged the transaction and froze his account.

“My financial institution advised me I used to be a second beneficiary of glitch funds and requested me to consent to a reversal,” he mentioned.

Ogbebor tried contacting the client, however that they had disappeared. Along with his account locked, he was pressured to open a brand new one simply to maintain his enterprise working.

An identical case in 2023 prompted many merchants to refuse to obtain funds from fintech platforms altogether. That 12 months, a glitch allowed customers to overdraw cash from Flutterwave, and a few of these funds have been funneled into crypto purchases. Since then, many P2P merchants have stopped accepting funds from fee processor accounts, fearing a repeat incident.

The anonymity of crypto makes it a horny choice for criminals making an attempt to scrub illicit cash. Whereas there is no such thing as a determine for a way a lot has been laundered by P2P buying and selling in Nigeria, nevertheless, officers had beforehand claimed the quantity runs into hundreds of thousands of {dollars}.

However glitch funds are just one piece of the puzzle. A much bigger, extra insidious drawback is cash laundering.

A high-profile instance is the case of Tijani Muiz Adeyinka, a former First Financial institution worker accused of diverting ₦40 billion earlier than fleeing. The Financial and Monetary Crimes Fee (EFCC) alleged that a number of the stolen funds have been transformed into USDT, a stablecoin steadily utilized in P2P buying and selling. Merchants who unknowingly facilitated these transactions have been later questioned.

“These items are occupational hazards,” mentioned a Web3 influencer who requested to not be named. “Crypto buying and selling is already a high-risk enterprise; the technique is to hope and pray. However it’s one factor to get scammed, and one other factor to obtain fraudulent funds. You can’t be saved.”

Scammers Hold Discovering New Strategies

At the same time as merchants turn out to be extra cautious, fraudsters preserve evolving.

One technique that’s gaining notoriety is chargeback fraud. A purchaser sends cash to a service provider and offers proof of fee. However after receiving the cryptocurrency, they file a dispute with their financial institution, falsely claiming the transaction was unauthorised. The financial institution then reverses the fee, leaving the service provider with no cash and no crypto.

A sufferer of this rip-off lately shared their expertise on social media, claiming to have misplaced ₦689,908. A Web3 influencer acquainted with the technique mentioned merchants now instantly transfer funds to a different account after each transaction to cut back their publicity.

Coin Locking

One other rip-off, coin locking, exploits the escrow methods of P2P platforms. A scammer initiates a commerce however delays fee, retaining the vendor’s cryptocurrency locked in escrow. The aim is to strain the vendor to cancel the commerce or launch the crypto with out fee.

Whereas P2P platforms now supply dispute decision methods, some merchants keep away from initiating promote orders altogether to forestall their funds from being locked in limbo.

The “Normies” Drawback

Other than fraudsters, merchants additionally must cope with well-meaning however inexperienced consumers—known as “normies.” These first-time consumers, unfamiliar with crypto buying and selling guidelines, can by chance set off crimson flags that result in account freezes.

To stop this, merchants set strict situations:

• No utilizing crypto-related phrases in transaction descriptions
• No sending funds from company accounts
• No rounding transactions to the precise kobo quantity (e.g., sending ₦100,000.00 as an alternative of ₦100,000.57)

These guidelines, whereas seemingly arbitrary, assist merchants keep away from pointless scrutiny from banks, which have traditionally been fast to freeze accounts linked to crypto.

“The largest problem isn’t scammers; any skilled dealer can deal with them,” mentioned Tosin Olorundare, a crypto dealer in Lagos. “The true situation is how banks limit accounts linked to crypto transactions.”

P2P Buying and selling: Nonetheless Well worth the Danger?

Regardless of the each day dangers, P2P merchants preserve coming again. The revenue potential is just too excessive, and those that survive lengthy sufficient ultimately be taught to navigate the hazards.

Some merchants have begun utilizing platforms like Bitget and Bybit, permitting them to verify a purchaser’s transaction historical past earlier than partaking. Others restrict their publicity by buying and selling in smaller quantities, capping transactions at $500 to minimise losses if issues go flawed.

P2P platforms themselves are additionally evolving. Many have launched ranking methods, the place merchants can construct credibility over time. These with low scores or a number of reviews of fraud danger being locked out of the platform, with no entry to their crypto belongings.

For now, merchants deal with the dangers as a part of the enterprise. The scammers, the frozen accounts, the authorized complications—they’re what they’re: occupational hazards in a high-stakes recreation.