Peer-to-peer (P2P) trading has been a lifeline for Nigeria’s cryptocurrency market since 2021, when government restrictions prevented exchanges from transacting with banks. However, as its popularity has increased, so too have fraudulent activities. Scammers now exploit the anonymity of crypto transactions to launder stolen funds, making P2P platforms a high-risk environment where traders must stay vigilant.
To safeguard against fraud, many traders have implemented strict measures, including rejecting large transactions, ensuring that buyers’ bank account names match their P2P profiles, and avoiding payments from third-party accounts. Some even refuse payments made via fintech processors like Flutterwave and Paystack, fearing potential reversals. Despite these precautions, scammers continue to evolve, devising new ways to exploit unsuspecting traders.
A significant threat in P2P trading is the circulation of “glitch money”—funds obtained when customers take advantage of bank system errors to withdraw more than their actual balances. In some cases, these “glitches” are outright fraud. Scammers use P2P platforms to quickly move these illicit funds before financial institutions detect the irregularities.
Monday Osas Ogbebor, a crypto trader in Abuja, fell victim to this issue when he unknowingly received glitch money through Kolomoni, a fintech app. Shortly after, his bank flagged the transaction and froze his account. Attempts to contact the sender proved futile, forcing Ogbebor to open a new account just to keep his business afloat.
A similar 2023 incident involving Flutterwave made traders even more cautious. A glitch enabled users to overdraw funds, some of which were funneled into crypto purchases. In response, many traders stopped accepting funds from fintech platforms altogether to avoid potential legal and financial consequences.
Beyond glitch funds, money laundering remains a pressing concern. The anonymity of cryptocurrencies makes them an attractive tool for criminals looking to clean illegal money. While official figures remain unclear, authorities estimate that millions of dollars have been laundered through P2P crypto transactions.
One high-profile case involved Tijani Muiz Adeyinka, a former First Bank employee accused of diverting ₦40 billion before fleeing. The EFCC later discovered that part of the stolen money had been converted into USDT, a stablecoin frequently used in P2P trading. Several traders who unknowingly facilitated these transactions were later questioned.
Even as traders tighten security measures, scammers continually find new ways to exploit vulnerabilities in P2P trading. Some of these ways include
Chargeback Fraud
This is where a scammer pays for crypto and provides proof of payment but later disputes the transaction with their bank. The bank then reverses the payment, leaving the seller without their money or cryptocurrency.
A recent victim of this scam reported losing ₦689,908, sharing their experience on social media. To stop risks, some traders now immediately transfer funds to another account after receiving payments.
Coin Locking
Another emerging scam is coin locking, where fraudsters manipulate the escrow system on P2P platforms. A scammer initiates a trade but delays payment, keeping the seller’s cryptocurrency locked in escrow. This forces the seller into a difficult position—either cancel the trade (risking penalties from the platform) or release the crypto without receiving funds.
Although some P2P platforms now offer dispute resolution services, many traders avoid initiating sell orders altogether to prevent their assets from being locked indefinitely.
Apart from dealing with fraudsters, P2P traders also face challenges from inexperienced buyers, known in the community as “normies.” These first-time crypto buyers often make mistakes that trigger account freezes and increased scrutiny from banks.
To avoid these risks, traders have set strict guidelines, such as avoiding crypto-related terms in transaction descriptions, not accepting payments from corporate bank accounts and not rounding transaction amounts to an exact figure (e.g., ₦100,000.00 instead of ₦100,000.57)
While these rules may seem irrational, they help prevent unnecessary bank restrictions, as financial institutions remain cautious about crypto-related transactions. Tosin Olorundare, a crypto trader in Lagos said, “The biggest challenge isn’t scammers, experienced traders can handle them. The real issue is how banks freeze accounts linked to crypto transactions.”
Despite these challenges, P2P trading remains highly profitable, making it difficult for traders to walk away. However, many have adapted by using platforms like Bitget and Bybit to verify transaction histories before engaging in trades, limiting transaction amounts to a maximum of $500 to reduce potential losses and also relying on rating systems that P2P platforms now offer to assess a trader’s credibility before engaging in transactions.
P2P platforms are also introducing stricter security measures, including blacklisting fraudulent traders and improving dispute resolution processes. Those with a history of scam-related reports risk losing access to their crypto assets entirely.
For now, traders see the scammers, frozen accounts, and legal risks as just another cost of doing business in Nigeria’s volatile crypto market. “It’s a high-stakes game,” one trader admitted. “You either learn to navigate the hazards or get wiped out.”
