Scams have always been a major risk for people who invest in cryptocurrencies, and NFTs are no different. Even if security gets better in the future, hackers will still find new ways to trick you into falling for NFT scams.
In the last few years, NFTs have gone through a big change, and they are now seen as a common way to invest. But for many investors, it’s still a “tough nut to crack” to know if it’s real and what its technical facts are.
There are really only two kinds of NFT buyers on the market. The first one knows that NFTs are legal and knows how they work. The second one, on the other hand, is not as good at NFTs but still thinks they are good investments.
There’s no doubt that the second one is more likely to be an NFT scam because scammers are more likely to target people with less experience in marketplaces.
There will always be scams in any market where people can make money. It can’t be stopped in its tracks, but investors can avoid it by being careful. So, everyone who trades on the market needs to know how to spot and avoid NFT scams.
Most Popular NFT Scams
Auctions with prices in the millions of dollars are happening all the time on NFT marketplaces. So, investors are putting a lot of money into digital collectibles and hoping to become billionaires quickly.
Sotheby’s, Christie’s, and OpenSea all have unique collections that bring in buyers. Even though NFTs are growing at a very fast rate, spammers in the market are always thinking of new ways to trick investors.
Here are some types of NFT scams that you should know about and try to avoid:
1) Scams involving phishing
Phishing scams are another type of NFT scam. They use ads on local websites and phone calls to ask users for their private wallet keys or 12-word security keyphrases.
Usually, people who want to buy NFTs have to sign up for a wallet first. MetaMask is a popular Ethereum wallet that users like to use to store their NFTs.
Last year, customers of Metamask were warned about a phishing scam that asked customers for their 12-word security code. Later, Metamask tweeted that it is all a big scam.
All of this happened when a fake MetaMask email asked wallet owners to verify their crypto wallets to meet new rules. Also, the spam emails said that if users didn’t do what was asked of them, their accounts would be locked.
In this case, if customers use the spam link to verify their accounts, hackers will steal their valuable assets. Many of the one million people who used MetaMask said they had lost their money.
Not every case is an email scam. Recently, people who used Metamask were hacked through Google ads. The assets in the victims’ MetaMask wallets had been stolen and moved to the fraudster’s account, so the wallets were empty when the victims checked them.
Metamask also warned Apple users about possible phishing attacks that would target iCloud.
The Phishing scam has hurt more than just MetaMask. In May, a phishing scam caused the loss of 29 Moonbirds NFTs worth about 750 ETH, or about $1.5 million.
How to avoid being taken in by Phishing Scams?
Before opening, one must check the domain URL. Users should make sure that they don’t use external links to verify the wallet or do anything else related to it.
When an activity asks for sensitive information or your security code, you should check with the customer support team or the community.
MetaMask wallets must be verified and other wallet-related tasks must be done through the official domain “MetaMask.io URL.” Do not click on sponsored ads or other links that are not official.
2) NFT scams involving technical or customer support
Frauds in technical or customer support happen all the time in every industry. For this type of NFT scam, thieves get the contact information for NFT holders from places like Discord, Telegram, and Reddit.
They will contact people who have made fake identities on sites that look like they are real. Scammers try to get users to do what they want by pretending to be technical staff of the marketplaces. Sometimes, these scammers will say they can help solve problems and ask customers for sensitive information.
If you believe them, they will ask for the credentials and sensitive information for your digital collectible. Once you give the information, the owners of the NFT will have their property stolen.
How to stay away from Tech Support Scams?
Keep in mind that the official team might not be able to reach out to community members through social media. So, don’t post any private information on social media. Before responding to messages that ask for sensitive customer information, you should contact the official team because an NFT scam could be waiting for you too.
3) Scams with Stealth Drop NFT
This NFT scam is now very easy to pull off through social media, especially Twitter. And, well, algorithms have a part to play in all of this. As you join more NFT conversations, Twitter starts sending you more of that kind of content.
So, fraudsters make a “Stealth Drop” NFT, which users who don’t know what’s going on think is a “good deal.” As part of the scam, the NFT is shown as a way to make “quick money,” but in reality, it is just a way to trick people into falling for an NFT scam.
How to avoid being scammed by Stealth Drop NFT?
You can tell if a project is a Stealth Drop by seeing if their Discord channel is closed and you have to be invited to join. Most of the time, the scammers will only invite prospects who are easy to trick.
4) Website Scams
For this type of NFT scam, very skilled con artists make copies of the original marketplaces. The designs will be like the ones on the first websites. The similarity is meant to make owners think it is the real page.
This type of NFT scam is called a “social engineering scam.” When people buy NFTs from scam websites, they lose their money if they don’t look at them carefully.
How to Tell if a Website is an NFT Scam?
Before you do anything on a website, you should do enough research to make sure that the official URL is real. Check out the site. Never enter the website through a link, a pop-up message, or an email letter.
5) Fake Influencers
An NFT project can get a lot of attention from celebrities and influential people. So, developers of NFTs go to influential people to help promote their projects. People may fall for these NFT scams before they can figure out that the endorsements are fake.
Some con artists try to make false promises in the name of charity. In June, a fake NFT influencer named Mineeervas stole 0.14 ETH from a Brazilian teenager.
Mineeervas was accused of giving the victim an alpha pass for a project run by Murat Pak and promoted by Punkie in exchange for 0.14 ETH. In the end, the buyer figured out that he or she had been tricked and that the pass was for a fake project.
How to tell if a crypto influencer is a fake?
Find out as much as you can about the project. Check the social media handles of the influencer to see if they are involved with the project. If there is an association, there will be official ads from the influencers.
6) NFTs that have been copied or stolen
One common type of NFT scam is to copy the original NFT. In this case, scammers copy an artist’s original work and then make NFTs.
Scammers use their Marketplace accounts to put these NFTs up for auction again after they have been copied or stolen. The plans for these NFT scams are so good that the buyer might think they are original works and buy one right away.
At some point, the people who bought worthless art realize that they were tricked. In the end, people who buy these copies end up with art that isn’t worth anything. Unfortunately, it’s too late to turn back now!!
A Dutch digital and animation artist named Lois van Baarle found 132 of her works for sale on OpenSea. The artist wrote on Twitter that “none of those works are listed with her permission.”
Lois said that NFT platforms don’t do much to stop this kind of duplication, and she also said that she doesn’t mint her art as NFTs.
And keep in mind that Lois van Baarle isn’t the only artist who has had copyright problems. In fact, NFT scams have happened to many other digital artists around the world.
DeviantArt, an online community for artists with 500 million digital works, is another example. This group of artists found copies of their works on more than 90,000 NFT platforms. Artists from the DevianArt community are now looking through the NFT marketplace to find their paintings.
The second type of duplication is making NFTs that are similar to an NFT collection that is already popular. Investors are confused by this, and most of them think it is a new collection made by the same team that made the original premium collection. The people who buy these copied NFTs are the ones who lose the most in this scam.
OpenSea has already said what they think about these kinds of things. A spokesperson for OpenSea said that it is against the rules of the platform to sell NFTs that were copied from other sources. The OpenSea technical team is always trying to get these NFTs taken off the list and the seller banned.
The NFT marketplace also let its customers know about the extra steps it was taking to stop fraud and plagiarism. Recently, OpenSea added security features that hide NFT transfers that look suspicious. In January, the marketplace changed its policy from “no limit on minting” to “50 items and 5 collections” as a way to help the people who make things.
Artists say that NFT marketplaces rarely use validating methods to stop this kind of infringement of intellectual property rights. Also, they don’t use any good ways to find out who the original artist is. In the end, it is the buyer’s responsibility to make sure they pay for the original art.
How can you keep duplicate artwork from being used in NFT scams?
The only thing investors can do to protect themselves from NFT scams involving duplicate artworks is to be careful. Before buying an NFT from a certain collection, one can look into the seller on more than two platforms. One must also compare the seller’s account information with what’s on their social media pages.
Platforms like OpenSea put a “blue tick” next to the seller to show that they are a legitimate business. One should always try to buy NFTs from a seller who has been checked out.
7) Frauds in the NFT Collection
Bid scams are a common type of NFT scam, and they usually take place on the secondary market to drive up the price. Bidders change the preferred currency to a low-value currency when they list NFTs for sale.
Changing the coin is a problem for NFT collection because a change in the value of the currency could cause investors to lose money.
How to Avoid Fraudulent Bids?
Bidding scams are easy to not only spot but also get away from. For this reason, you should always check the listed currency and not accept bids that are lower than your limits.
8) Scams with NFT Airdrop or Giveaway
Well, what looks like a “Robin Hood-style” act of giving away can have other reasons. When scammers post free NFT giveaways on social media, this is called a “airdrop scam.” Scammers ask people who click on the link to agree to “terms and conditions.” Also, they ask people to send the message or tweet to other people.
When a user clicks on one of these links, they are then asked to connect their MetaMask wallet to claim the prize. Your login information will be saved on their system. Spammers will be able to get into your MetaMask library and take your assets easily.
Last year, Fractal, a new NFT marketplace, was hit by an airdrop attack. The Fractal Discord server was hacked, and 373 users lost a total of $150,000 in money.
Members of a Discord channel were sent a message with an offer to mint celebrity NFTs. A fake link was posted to get people to click on it. When Fractal members used the broken URL to mine, they lost their SOLANA tokens.
In a similar case, hackers sent a fake video promoting a fake crypto giveaway to a number of popular crypto YouTubers.
How to avoid giveaway and airdrop scams?
Scams that use NFT airdrops or giveaways are easy to avoid. How ??
Well, DON’T CLICK if you aren’t sure if the site is real or not. Visit the websites or social media accounts that are linked to the hidden links to find out more.
In a typical rug pull scam, promoters use social media to try to get people excited about the NFT collection before it even comes out. Later, when people have put enough money into it, the developers just take off with the money. Because the decentralization space is based on anonymity, it is easy to pull off these NFT Scams.
So, rug-pulls happen when both the price and the popularity of the tokens go up because of “hyping and promotion.” And as soon as enough NFTs have been sold, the people who support the NFT stop doing so all of a sudden. So, the market price of NFT slowly goes down until it hits zero.
In another type of rug pull, the developer changes the underlying code so that the NFT can’t be sold again. In this case, the first sales may bring in enough money for the creators, but the investor will lose money.
Jake Paul recently promoted “The Animoon” project, which turned out to be a $6.3 million scam.
Early this year, Federal prosecutors charged two men for a $1.1 million NFT scam in which 8888 NFTs from the Frosties Project were used to trick investors.
How to tell if a project is a rug-pull?
So, how can someone tell if they’ve been “rug-pulled”? Not only is this a dangerous type of NFT scam, but it is also hard to spot because it is done so subtly!
Investors must look at the social media profiles of developers before taking a chance on an NFT investment. They should also pay attention to how many people interact with them (as high engagement and followers are good signs).
The next step is to find out what the project team has already collected and how well it has done so far.
Users should also look out for red flags like information that doesn’t match up or a team that doesn’t answer questions. Check out the official website in detail as well. Having a clear road map on the website is a plus.
10) Pump and Dump in NFT Projects
Pump-and-dump scams are common in all trading markets, and the NFT space is no exception. Fraud is the act of making the demand for NFTs rise artificially. Once the pump raises the price of NFTs, con artists sell all of their assets for a good profit.
This usually happens when an individual or group buys a lot of NFTs from the same collections. They bid for the price to go up and then sell when the price goes up. Other investors who bought the NFT because they thought demand was going up are now in the red because of the fraud.
Part of this scam is something called the “Wash Trading Technique.” It happens when the same person buys an asset and then sells it again, driving the price up even more.
Pump-and-dump scams have been around for a long time on the NFT market. One of the first NFTs, Cryptokitties, was also accused of being a “pump and dump.”
In its early days, Cryptokitties got a lot of attention from the general public. Some of the artworks even went up in price to $155,000. After prices dropped 95% in six months, investors had no idea what was going on.
If we wanted to look at a recent example of this type of NFT scam, we couldn’t miss the Mojang controversy. Mojang Studios banned NFTs in its popular, 10-year-old game “Minecraft” a week ago, citing “pump and dump” as one of the reasons.
How to stay away from the Pump and Dump Scam.
When you see sudden jumps in the price of NFTs, look at the collection’s price history. Not only that, but one must also know the records of the same in the wallet. Wallet records can be checked on NFT marketplaces like OpenSea, which is a good thing.
Take note of the number of trades that happened during the hype stage and the history of trades. If fewer people are buying and selling NFTs, this is an immediate “Red Flag.”
In the meantime, look at what people are saying on Discord, Twitter, and in the community to find out what they think. Taking a look at the situation around a price hike can help you figure out why the price went up. Again, if you see a sudden buzz about a low-value project, stay away from it!
Since last year, the NFT market has done very well and grown a lot. At the beginning of this year, security for NFT marketplaces was very hard.
In January 2022, theft and crime reached an all-time high in India and the US NFT market. So, NFT market experts told investors and owners to be careful.
In a strange way, despite all the ways to make money, NFTs are also full of risks. Scams and frauds are a normal part of the business world, so con artists keep pulling tricks in NFT marketplaces.
So, people need to spend time on projects. Use passwords that are hard to guess and two-factor authentication. If you do something on an official website, be careful. Before you do anything, double-check every piece of information.
Even if there is a chance of being scammed, no one wants to miss out on a chance to make money. As an investor, you need to keep your greed in check and be careful. By paying close attention, most people can avoid being taken in by scams.
We can’t help but repeat what the poet Horace said about greed: “He who is greedy is always in need.” So, stay hungry and curious, but watchful.