Author: Lawyer Sun Yujie

Recently, a longtime friend in the cryptocurrency circle consulted Lawyer Mankun, as he was scammed out of 50,000 Tether (USDT) while selling virtual currency on a well-known overseas cryptocurrency derivatives trading platform.

The situation was roughly as follows: the friend sold his Tether (USDT) on the platform, and the buyer claimed to have a Hong Kong account and could only make payment in Hong Kong dollars. The buyer requested the friend's Hong Kong bank account, and without hesitation, the friend provided it. Shortly after, the friend received a notification of a Hong Kong dollar deposit.

Thinking that the money had been received, the friend promptly transferred his Tether (USDT) to the address provided by the buyer. However, shortly after, the friend discovered that the deposited Hong Kong dollars had been withdrawn. It was at this point that the friend realized he had been scammed.

Similar scams are actually quite common. A recent case announced by the Shanghai Huaxin Police Station revealed that a company executive, Yang, believed that 180,000 foreign exchange transfer vouchers from a supposed "client" had been received, and agreed to pay the remaining balance on behalf of the client. He transferred 100,000, only to realize later that the foreign exchange had been withdrawn, thus realizing he had been deceived.

01 What are the common tricks of check fraud?

In Hong Kong, interbank Hong Kong dollar remittances can be made using checks. A check is a document issued by the drawer, authorizing a bank or other financial institution handling check deposit business to unconditionally pay a specified amount to the payee or holder upon presentation.

However, in Hong Kong, the deposit of a check does not mean the funds have been received. There is a 24-hour reconciliation period between the deposit and the actual receipt of funds. During this 24-hour period, the payee will receive two separate bank SMS notifications: the first notification indicates that the funds have been deposited, but these funds are only "displayed as a number in the payee's account" (also known as "pending"), and are not actually available. The second notification is a reminder that the funds will be available the next day (i.e., after 24 hours from the first deposit notification). It is at this point that the funds become actual usable funds.

It is important to emphasize that due to the operational characteristics of the Hong Kong financial system, the payer can revoke the remittance at any time during the reconciliation period, and even if the payer does not revoke the check, the check may still not be honored due to insufficient funds, mismatched signatures, or other factors, resulting in the funds not being received (also known as "bouncing a check").

In the cases announced by the police and the events experienced by the friend, the scammers took advantage of the unfamiliarity, especially among mainland friends, with the operation of the Hong Kong check system to commit fraud.

The most popular methods of overseas check payment fraud in the past two years are as follows: first, using the time difference to revoke the check after issuance; second, bouncing a check (insufficient funds, etc.); and third, deceiving to obtain the difference in payment.

1. Revoking the check after issuance. Similar to the method used in the above scam, scammers use the time difference to make the other party mistakenly believe that the transfer has been received, but in reality, it has not yet reached the account. After the other party makes the virtual currency payment, the scammer quickly revokes the transfer.

2. Bouncing a check or insufficient funds. After a check is deposited, most banks have a freeze period (retrieval period), some as long as six months. If the check bounces during this period, not only must the money be returned, but a fee must also be paid. This type of scam is more common in foreign trade transactions.

3. Deceiving to obtain the difference in payment. This method is even more malicious than the first two scams. The scammer intentionally overpays when issuing the check, and when the payee mistakenly believes they have received the money, the scammer will politely ask for the overpaid amount to be returned, claiming it was an accidental overpayment.

02 Check fraud targeting virtual currency trading

Scammers' learning ability and diligence are no less than those of any newcomer in the workplace. In a new round of scams, scammers have not only targeted physical enterprises but have also set their sights on the emerging virtual currency trading market.

Here, scammers generally pose as buyers and engage in simple communication with sellers of virtual currency automatically matched by the trading platform, gaining initial trust. Because check payment fraud requires a local Hong Kong account, they will then request the seller to provide a local Hong Kong account. They take advantage of the loophole in the unfamiliarity, especially among mainland friends, with the 24-hour reconciliation system of the Hong Kong check, depositing a "crossed check" for the transaction amount into the provided Hong Kong account. After the seller receives the first deposit notification, the scammer urgently urges the seller to transfer the virtual currency to their designated address. After receiving the virtual currency, the scammer withdraws the check transfer using various excuses such as mismatched signatures or incorrect amounts.

Therefore, although the above scam may seem like an old trick, it still "reaps rich rewards" in emerging formats. At the same time, the scammers protect themselves very well and are usually not from Hong Kong. After being scammed, the road to recovery can be extremely difficult.

03 Lawyer Mankun's reminder

The healthy and orderly development of the market depends on legal protection, and at the same time, we must increase our awareness of prevention.

1. Increase vigilance in daily life. Listen and observe more, become familiar with common fraud methods, and remain cautious during transactions. For example, follow our WeChat public account for Lawyer Mankun, and learn various tricks commonly used in the cryptocurrency circle.

2. Pay attention to buyer information. When trading virtual currency on overseas exchanges, pay attention to the seller's historical transaction order quantity, past buyer reviews, platform certification, and prefer cash settlement methods. Always verify the receipt of funds before releasing the currency. If the buyer insists on using check remittance, extend the transaction time until the check is actually honored, and always rely on the available bank balance.

3. Contact the customer to freeze the account and report the crime promptly. If you unfortunately encounter such a scam, do not panic. Contact the exchange's customer service personnel as soon as possible, organize relevant written materials, and apply to connect with the counterparty's trading account. If the amount of funds scammed is significant, you can also entrust a lawyer to assist in reporting the crime to the public security authorities.

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