04.06
Unknown
On Tuesday 4.6.2013 the LocalBitcoins.com bank account used for trading bitcoins using SEPA (Single Euro Payments Area) transfers was frozen. The account was unfrozen three days later.
The trading party had deleted the user account immediately after receiving bitcoins.We could not contact the party any longer.
Later on Tuesday 4.6.2013 13:00 AM we receive another phone call from our bank. The Swiss bank had remade the request to chargeback the SEPA transfer, with an additional request to freeze our bank account. Our bank complied with its international contracts and froze our account until the situation was resolved.
To resolve the situation, we send our bank the LocalBitcoins.com receipt of the transaction, as the proof of legitimacy. All trades made on LocalBitcoins.com automatically generate an electronic receipt. The receipt is signed using bitcoin addresses, using strong cryptography. You can find the receipts on your LocalBitcoins.com account by going to your user profile, clicking Dashboard, clicking Closed escrows, clicking Reference id and scrolling down the page.
By the laws of Finland, the originating bank of a wire transfer (the Swiss bank in our case) is responsible for clearing the money and making sure the transfer is legit. We had all the reasons to believe that our trading party is not involved any criminal activity, as we had traded with the party before without any complications. Thus, after showing the receipts, on Friday 7.6.2013, three days later, our bank unfroze the account.
The banks did not disclose what happened between them. Here are our theories
We do not know how the losses between banks are dealt in these kind of situations. However, if the events like this are likely to repeat, one might get the status of persona non-grata in a bank.
LocalBitcoins.com operates in Helsinki, Finland. We pay taxes to Finland, we follow the laws of Finland and European Union. However, the virtual currencies in online networks are a contemporary phenomenon. Resolution processes are not everyday for all involved parties yet. Thus, we recommend our traders to take the following safety measures
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| A cold day in a bank in Finland |
- We received a large bitcoin buy request from Switzerland on Monday 3..62013 (a day before). A LocalBitcoins.com user wanted to buy bitcoins with Euros using a SEPA bank transfer.
- The same user had traded with us before with smaller sums of euros
- Thus, we believed the trade request was legitimate
The trading party had deleted the user account immediately after receiving bitcoins.We could not contact the party any longer.
Later on Tuesday 4.6.2013 13:00 AM we receive another phone call from our bank. The Swiss bank had remade the request to chargeback the SEPA transfer, with an additional request to freeze our bank account. Our bank complied with its international contracts and froze our account until the situation was resolved.
To resolve the situation, we send our bank the LocalBitcoins.com receipt of the transaction, as the proof of legitimacy. All trades made on LocalBitcoins.com automatically generate an electronic receipt. The receipt is signed using bitcoin addresses, using strong cryptography. You can find the receipts on your LocalBitcoins.com account by going to your user profile, clicking Dashboard, clicking Closed escrows, clicking Reference id and scrolling down the page.
By the laws of Finland, the originating bank of a wire transfer (the Swiss bank in our case) is responsible for clearing the money and making sure the transfer is legit. We had all the reasons to believe that our trading party is not involved any criminal activity, as we had traded with the party before without any complications. Thus, after showing the receipts, on Friday 7.6.2013, three days later, our bank unfroze the account.
The banks did not disclose what happened between them. Here are our theories
- The bank account of our trading partner was stolen and the trading partner was clearing the stolen money by exchanging it to bitcoins. The trades that happened before the freeze did not trigger statistical threshold points which will alert the bank staff for manually intervention.
- The trading partner was a scammer who was relying on the fact that the Swiss bank would automatically chargeback the SEPA transfer in the case a claim was made. The prior bitcoin purchases had been done to build reputation on LocalBitcoins.com reputation system to make the larger trades seem more safe. We are not aware what are the legislation and contract obligations of Swiss banks regarding SEPA transfers. If the Swiss banks refund the SEPA transfers without due diligence this would mean the scammer could keep both bitcoins and euros.
- This was an attempt from a hostile party, like a government or a competitor, trying to stab us and hinder our operations.
We do not know how the losses between banks are dealt in these kind of situations. However, if the events like this are likely to repeat, one might get the status of persona non-grata in a bank.
LocalBitcoins.com operates in Helsinki, Finland. We pay taxes to Finland, we follow the laws of Finland and European Union. However, the virtual currencies in online networks are a contemporary phenomenon. Resolution processes are not everyday for all involved parties yet. Thus, we recommend our traders to take the following safety measures
- For large SEPA transfers with untrusted partners using suspiciously large amounts, wait at least 24 hours until releasing the escrow. If a SEPA transfer has complications it is likely that your bank will alert you during the next working day. Also, as the reddit.com user davout-bc points out, SEPA transfers are recallable within 10 days. Your bank may or may not ask your permission for it. Please confirm with your bank for their policy.
- Do not rely on one bank account. Trade on a separate account on a separate bank.
- Get a reserve bank account in another country
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