He is correct! The Bitcoin market is full of bad actors, scammers and other unprincipled players.
Here’s the thing; the Bitcoin protocol works well, it is reliable, machine driven, secured by many tens of thousands of computers around the world all running the same code.
However, if you want to interact with this software, this network, you are likely going to have human interaction. These humans are not subject to oversight, regulation, fit and proper persons tests, examination requirements, continuing professional development programmes. There is essentially no barrier to entry and colossal growth. This attracts wildcatters, all manner of ne’er do wells and outright scammers. I am a freedom and innovation lover, wary of burdensome rules and incumbent large operators shielding
themselves from competition by encouraging regulatory hurdle building to stymie new entrants. But what’s to be done?
Let me share an example of a fraud perpetrated against me yesterday on the HodlHodl platform.
I posted to sell some Bitcoin and a user named Vir popped up and offered to buy €1,016.25 Bitcoin from me. All good so far. The system requires that on acceptance of the trade I send the BTC into escrow pending my confirmation that the Euros are received into my account. I posted the BTC into escrow.
Now watch for the sleight of hand. Another user named Crpytomojo offered to buy €1,500, I agreed to this. The BTC took time to get into the mempool so he started another purchase with me, here is a transcript snippet:
So what happens next is the magic. He initiates another purchase for exactly the same amount as the Vir user. €1,016.25, (I think this was the minimum set). By 1600 I had released the BTC to Vir, as I had received €1,016.25 from a Goncalo Matias into my bank account matching the contract with Vir.
Then I get a message from Crpytomojo confirming our transaction with a bank receipt:
Now I have got confirmation that Crpytomojo is Goncal Matias and has sent the €1,016.25. So I have two separate users both proving that they are Goncalo Matias and having sent €1,016.25 to my account. However, in my account I have received one amount of €1,016.25, not two payments.
So I went back to Vir the next morning and asked him for verification that he was the one paying into my account. He was able to confirm the last name of the payee, Matias:
I had released BTC to both Vir and Crpytomojo, but only one had paid, but both had been able to confirm the payee name without my offering it. How is this scam possible? The only thing I can imagine is that Vir (with good trading reviews) and Crpytomojo are one and the same person. How else would Crpytomojo know the exact amount and the payee name of Vir?
If you know some other way this scam was done please let me know?
Meanwhile I emailed HodlHodl and suggested to avoid this double spend attack that a secret unique identifier is provided with each transaction. Otherwise this is likely to be repeated many times.
It is a shame that Gary Gensler is right: There are lots of scammers and bad actors in this arena, which makes it a tricky place to operate in, Bitcoin goes tick tock, next block but the people involved go slip slap next trap.
Disclaimer: This is a true story. The author of this article wishes to remain anonymous.