Over the past several years, NFTs, or non-fungible tokens, have been quite popular, as have NFT scams. These digital assets offer a distinctive platform for purchasing, exchanging, and selling virtual collectables and other goods. Various fraudsters attempt to steal assets and money from others after gaining access to the NFT market.
NFTs are predicted to be profitable by 2025, and the worldwide NFT market is predicted to grow to about $80 billion. With such huge figures comes the rise of scammers who find loopholes to scam people.
In this blog of ‘Dumb Ways To Lose Money,’ we will discuss the various NFT scams that have spanned over the years. No matter how secure the platform you’re trading on is, scammers still find a way to scam you.
Continue to read about the various NFT scams and strategize how you can protect yourself from them.
Is Purchasing NFTs Secure?
NFTs are safe to purchase and sell, provided they have been bought from a verified seller. In general, NFTs are safe cryptographic resources.
Blockchain technology provides an authenticated and verifiable record of ownership. It cannot be hacked. However, gaining access to your NFT is the weak point in every blockchain.
Most NFTs can only be bought using cryptocurrencies that the exchange you’re using accepts. To make a purchase, you’ll need cryptocurrency and a digital wallet.
Other online NFT marketplaces like Rarible allow you to buy NFTs. You can also check out OpenSea for a digital wallet that accepts USDC, ETH, DAI, and many more crypto.
Types Of NFT Scams
We have heard of the various crypto scams, but do you know about NFT scams? That’s right. Scammers find ways also to scam you in the NFT space. We have devised a table of NFT scams that will give you better insights and help you prepare better:
Scam Type | Description |
Counterfeit NFTs | Fraudsters replicate well-known NFTs with small modifications to the original NFT picture or information. They then offer these cloned NFTs on marketplaces, duping purchasers into believing they are obtaining a valuable NFT. The victims fall prey and are left with a useless copy. |
Rug-Pull Scams | Rug pulls in the NFT space happen when programmers (scammers) give up on a project and steal money from investors. Once these scammers steal the money, they disappear with the funding received. The program incorporated in these investments prevents investors from selling cryptocurrencies and tokens after purchase. This leaves their (investors) investment meaningless. Frosties NFT and Evolved Apes are examples of rug-pull scams. |
Phishing Scams | Scammers deceive victims into disclosing personal information or installing malware by sending them false emails, websites, or texts. They perform such an activity in an attempt to steal your private keys. The private key for each user’s digital wallet is unique, unlike passwords. If this key is lost, resolving the issue will be challenging. Since each key is unique, changing it requires creating a new wallet. OpenSea Phishing Attack that took place in February 2022 is one such example of a phishing scam. |
Bidding Scams | Scammers utilize wash trading (trading the same NFT across markets under their control) and bots to submit inflated bids on NFTs. Without your awareness, scammers alter the coin used for the bidding, leaving you with a worthless coin and no NFT. |
Pump and Dump NFT Schemes | This scheme involves scammers raising the price of a cryptocurrency through deceptive advertising before selling their holdings, which leads to a plummet in prices. Thereby, scammers swiftly sell their holdings, driving the price to fall and leaving naive investors with bogus tokens. |
NFT Airdrop Scams | Scammers airdrop (for free) NFTs into users’ wallets, frequently disguising them as priceless treasures or brand-new initiatives. Given that victims need to allow fraudsters access to their wallets to engage with these NFTs, scammers can embezzle money or steal additional NFTs. Free Metaverse Land Grab is a popular example of an NFT airdrop scam. |
Customer Support NFT scams | Scammers pose as customer service representatives for well-known NFT platforms and contact consumers. They state that there are problems with their wallets or accounts. Scammers then get complete access to victims by tricking them into “verifying” ownership by linking wallets or inputting seed phrases. |
Unverified Platforms and Marketplaces | Some cryptocurrency platforms and marketplaces may be unlicensed or lack adequate security, putting investors’ cash at risk. Scammers may entice investors in with claims of a vast Bitcoin exchange. However, there is no exchange, and the investor does not realize it is a scam until after losing their money. |
Ponzi and Pyramid Schemes | Scammers build NFT initiatives that offer early returns or prizes for investing or bringing in additional investors, like classic Ponzi schemes. Initial shareholders are paid off with funds from new investors, putting on a show of business until the scam eventually implodes. |
Front Running and Insider Trading | Scammers can front-run or purchase NFTs before public listing and sell them immediately as prices rise after the initial release. This can happen, provided they have intimate information of impending NFT dumps or listings. Additionally, insiders trade on exclusive knowledge of NFT initiatives. |
Investor Scams | Fraudsters inflate NFT projects and promote them as the next big thing to increase demand. Scammers vanish with the money they receive after an initial mint or NFT sale that raises money from investors. |
Real-Life Examples Of Top NFT Scam
Despite trading on a secure platform, scammers still find ways to scam buyers and sellers. After listing the various NFT scams, here are real-life examples for a better understanding:
1. The Beeple's NFT Controversy
Prominent digital artist Beeple has been in the news for allegedly manipulating prices; in 2021, his “Everydays: The First 5000 Days” NFT sold for $69 million. One of the two tweets Beeple tweeted during that period had a phishing link that made around 37 ether, or $73,000.
The second tweet tricked the artist’s fans of $365,000 worth of other cryptocurrencies and NFTs. Users who clicked on one of the two links would have their cryptocurrencies and NFTs deleted from their wallets.
After allegedly taking over Beeple’s account for a few hours on Sunday, ArtNet reports that the hackers altered the artist’s Twitter bio to promote a raffle for a fictitious collection with Louis Vuitton, with which Beeple worked in 2019.
A group of collectors are accusing the Beeple team of being involved in wash trading.
Wash trading involves buying and selling the same NFTs repeatedly to boost prices on platforms such as OpenSea artificially.
2. Fake NFT Giveaway scam
The co-founder of Ethereum, Vitalik Buterin, had his Twitter account attacked maliciously. This event entailed the development of a fraudulent phishing website that allegedly stole money worth more than $800,000.
The fake message purported to be a promotion from blockchain software company Consensys, offering commemorative NFTs for free. As with many other false airdrop incidents, users were lured to click on a URL within the article. This harmless-looking URL directed gullible buyers to a phishing website.
The hack was discovered due to the diligence of PeckShield’s blockchain security specialists. Vitalik’s account was soon restored. This incident highlights that scammers can access your social media accounts if two-factor authentication is not enabled.
Intrigued? Well, there is no end to scam stories, and reading more about them will help you gain more insights. Read our blog on NFT Scams and strategize how to stay safe from scammers and save your hard-earned assets.
How To Avoid NFT Scam
It is difficult to avoid getting scammed if you haven’t done enough research or verified before setting fire to your investments. Here are some ways in which you can avoid NFT scams:
- Verify the links before you click on them. Always look for HTTPS in the URLs.
- Check the seller’s identity and history before buying or selling an NFT. Also, always double-check the price of the NFT before you buy.
- Stay clear of fake Discord invites and talk to people if they are legit Discord servers that don’t scam people.
- Never accept NFT airdrops from strangers.
- Using a VPN to encrypt and anonymize your NFT traffic may make it more secure.
- Verify celebrity/influencer endorsements of NFTs before investing in them.
- Refrain from giving in to the “fear of missing out” (FOMO), a deception con artists use.
How To Report An NFT Scam
For OpenSea
- Contact antifraud@opensea.io via email.
- Put “Stolen NFT” in the subject line.
- Provide a contact address, token ID, URL, and collection in the body text.
- Provide as much detail as possible on the illegal means by which the NFT was acquired.
For Rarible
- Go to Rarible.com to learn more.
- Locate the search button and type in the token’s ID and the name of your NFTs collection.
- After you discover your stolen NFT listing, click the “…” button next to the NFT’s title.
- Choose “report” from the drop-down menu by scrolling down.
- A popup window will let you explain the problem in more detail.
- Send an email with as much detail about the situation as possible to support@rarible.com after reporting the NFT.
Conclusion
As the NFT market expands, scammers develop creative methods to rob NFT creators of their hard-earned digital possessions. We have listed various NFT scams in the blog to enlighten you and gain better insights.
Traders must do their research, have a strong password, and enable two-factor authentication (2FA) on their NFT accounts. Always make sure to never click on links that seem fishy and never share your passwords. Use VPN for encryption and anonymize NFT traffic.
Remember that you will be taxed for every crypto/NFT transaction. We at KoinX also help you simplify crypto taxation and compliance. We give you elaborate tax reports based on your portfolios in no time.
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That concludes another article on “Dumb Ways To Lose Money,” in which we discussed how to trade sensibly, protect your capital, and avoid mistakes. Watch this space for more insightful takeaways from this captivating series!
