Crypto’s dark side: How P2P traders navigate daily scams, fraud, and frozen accounts

Peer-to-peer (P2P) trading helped keep Nigeria’s crypto market alive when the government restricted exchanges from transacting with banks in 2021. Yet, as the method has become more popular, it has become a magnet for fraud. Scammers exploit the anonymity of cryptocurrency to launder stolen funds—whether from bank glitches, hacked accounts, or outright fraud—turning P2P platforms into a battleground where traders must constantly defend against threats. Many traders, hoping to stay on the right side of the law, have set up guardrails: they refuse large sums, insist that buyers’ bank account names match their P2P platform identities, and avoid transactions from third-party accounts. Some even enforce a “no Flutterwave policy,” rejecting funds sent through fintech payment processors like Flutterwave and Paystack. Despite these precautions, fraudsters continue to find ways to slip through. The Risks of Glitch Money and Money Laundering One of P2P traders’ biggest risks is receiving “glitch money,” monies obtained by customers who take advantage of bank technical glitches to withdraw more than their balances. Other times, these “glitches” are just flat-out fraud. When they happen, scammers rush to move the fraudulently obtained monies through P2P trading before the financial institution notices. Monday Osas Ogbebor, a crypto trader in Abuja, unknowingly received glitch money from a buyer who paid through Kolomoni, a fintech app. Shortly after, his bank flagged the transaction and froze his account. “My bank told me I was a second beneficiary of glitch funds and asked me to consent to a reversal,” he said. Ogbebor tried contacting the buyer, but they had disappeared. With his account locked, he was forced to open a new one just to keep his business running. A similar case in 2023 prompted many traders to refuse to receive funds from fintech platforms altogether. That year, a glitch allowed users to overdraw money from Flutterwave, and some of those funds were funneled into crypto purchases. Since then, many P2P traders have stopped accepting payments from payment processor accounts, fearing a repeat incident. The anonymity of crypto makes it an attractive option for criminals trying to clean illicit money. While there is no figure for how much has been laundered through P2P trading in Nigeria, however, officials had previously claimed the amount runs into millions of dollars. But glitch funds are only one piece of the puzzle. A bigger, more insidious problem is money laundering. A high-profile example is the case of Tijani Muiz Adeyinka, a former First Bank employee accused of diverting ₦40 billion before fleeing. The Economic and Financial Crimes Commission (EFCC) alleged that some of the stolen funds were converted into USDT, a stablecoin frequently used in P2P trading. Traders who unknowingly facilitated those transactions were later questioned. “These things are occupational hazards,” said a Web3 influencer who asked not to be named. “Crypto trading is already a high-risk venture; the strategy is to hope and pray. But it is one thing to get scammed, and another thing to receive fraudulent funds. You cannot be saved.” Scammers Keep Finding New Methods Even as traders become more cautious, fraudsters keep evolving. One method that is gaining notoriety is chargeback fraud. A buyer sends money to a merchant and provides proof of payment. But after receiving the cryptocurrency, they file a dispute with their bank, falsely claiming the transaction was unauthorised. The bank then reverses the payment, leaving the merchant with no money and no crypto. A victim of this scam recently shared their experience on social media, claiming to have lost ₦689,908. A Web3 influencer familiar with the strategy said traders now immediately move funds to another account after every transaction to reduce their exposure. Coin Locking Another scam, coin locking, exploits the escrow systems of P2P platforms. A scammer initiates a trade but delays payment, keeping the seller’s cryptocurrency locked in escrow. The goal is to pressure the seller to cancel the trade or release the crypto without payment. While P2P platforms now offer dispute resolution systems, some traders avoid initiating sell orders altogether to prevent their funds from being locked in limbo. The “Normies” Problem Aside from fraudsters, traders also have to contend with well-meaning but inexperienced buyers—referred to as “normies.” These first-time buyers, unfamiliar with crypto trading rules, can accidentally trigger red flags that lead to account freezes. To prevent this, traders set strict conditions: No using crypto-related terms in transaction descriptions No sending payments from corporate accounts No rounding transactions to the exact kobo amount (e.g., sending ₦100,000.00 instead of ₦100,000.57) These rules, while seemingly arbitrary, help traders avoid unnecessary scrutiny from banks, which have historically been quick to freeze accounts linked to crypto. “The biggest challenge isn’t scammers; any experienced trader can handle them,” said Tosin Olorundare, a crypto trader in Lagos. “The real issue is how banks restrict accounts linked to crypto transactions.” P2P Trading: Still Worth the Risk? Despite the daily risks, P2P traders keep coming back. The profit potential is too high, and those who survive long enough eventually learn to navigate the hazards. Some traders have begun using platforms like Bitget and Bybit, allowing them to check a buyer’s transaction history before engaging. Others limit their exposure by trading in smaller amounts, capping transactions at $500 to minimise losses if things go wrong. P2P platforms themselves are also evolving. Many have introduced rating systems, where traders can build credibility over time. Those with low ratings or multiple reports of fraud risk being locked out of the platform, with no access to their crypto assets. For now, traders treat the risks as part of the business. The scammers, the frozen accounts, the legal headaches—they are what they are: occupational hazards in a high-stakes game.