With NFT scams becoming increasingly more sophisticated, it’s easier than ever for anyone to fall prey for them. In this article, we focus on NFT scams, so that you don’t lose your digital collectibles before turning a profit.
NFTs have taken the world by storm, disrupting the art world and industries beyond. While crypto enthusiasts consider this an exciting sign that crypto adoption is starting to catch on, it’s hard to discern who is a trustworthy creator and who is a bad actor in the new space.
The growing mainstream interest in NFTs has made many popular NFT projects’ communities subject to phishing attacks. This has sparked active discussions on how to best protect your NFT assets.
Since the NFT space is still budding, keeping abreast of common scam tactics and the latest in NFT safety and security is very important.
Keep reading to learn more about how you can spot red flags and keep your NFTs safe.
NFTs Are Appealing To Many, Scammers Included
With the use cases of NFTs growing significantly, these digital assets are pointing to a new era of the digital world. The potential of NFTs has piqued the interest of many, including tech giants and celebrities.
However, because the NFT space can still be considered in its initial coin offering (ICO) stage, the framework it’s built on is still vulnerable to bad actors looking to take advantage of new trends and emerging technology.
But what gives NFT its value? Dropping five or even six figures on a JPEG seems like a lot, but what makes NFTs valuable is their utility and uniqueness. NFTs essentially create a permanent digital record of your exclusive ownership on the blockchain and ensure authenticity.
For some, owning a digitally tokenized art piece can serve as a ticket to exclusive online communities, chat rooms and interactive experiences.
However, there are a few common scams that you should be aware of:
7 Most Common NFT Scams
1. Fake Marketplaces
If you’re thinking about investing in your first NFT, the first thing is to find a platform where you can buy and sell NFTs. A quick google search will get you millions of search results, but sadly there are many phony NFT marketplaces among them. These fake sites don’t have legitimate NFTs, so if you buy one, the site will record down your credentials from your transaction details. Moreover, these sites may even ask for your private keys or 12-word security seed phrases, and use it to drain your digital wallet of all your assets.
To avoid these scams, always choose legitimate NFT trading platforms, like Binance NFT marketplace, for crypto transactions and never enter your information in links, pop-ups, or emails.
As a general rule, you only need to use your seed phrase when creating a hardware backup of your crypto wallet or when recovering your wallet.
2. Fake Offers
NFT scammers often impersonate legitimate NFT trading platforms and send you fake emails claiming that someone has made an offer for your NFT. These phishing emails aim to get you to follow the embedded link that takes you to a fake NFT marketplace.
And like all other phishing scams, the button will lead you to a fake page that will ask you to link your digital wallet and submit your seed phrase, allowing bad actors to hack into your wallet.
To avoid these kinds of NFT scams, always check and verify the sender address of any email received from an NFT trading platform.
3. Fake Technical Support
Fake customer service representatives or technical support messages is another common scam. For example, imagine you’re having technical difficulties on a popular NFT marketplace and ask for help on a public forum like Discord. Someone who claims to represent the marketplace then offers their assistance.
The fake support agent might ask you to share your screen to check what’s going on, making you inadvertently reveal your cryptocurrency wallet’s credentials.
When you do so, they’ll take screenshots of your seed phrase or the QR code linked to it. The scammer could also redirect you to a website that looks almost identical to the genuine one. Then, they’ll convince you to enter your personal information, such as your seed phrase. This leaves your digital wallet vulnerable to theft.
How do you avoid these kinds of scams and keep your NFTs safe? Only ask for help through the official NFT marketplace and double check the site domain. Some scammers may send you fake security alerts about your account or NFT collection, but the tactics are similar. Don’t click on anything before verifying its legitimacy.
4. Fake Giveaways
Posing as employees from popular NFT trading platforms, scammers will contact you via social media and ask you to join their NFT giveaway campaign. They might promise you a free NFT as long as you spread the giveaway and sign up for an account on their website – a phishing site.
And once they have gotten you to link your digital wallet credentials to receive your prize, they will record what you type, gain access to your account and potentially steal your library of NFTs.
To avoid falling for this type of NFT scam, make sure you check out that person’s social media accounts and double check that the link you’ve received from them matches the company’s legitimate domain name.
5. Rug Pull Scams
Rug pull scams are when a person or a group of people release a preliminary collection of NFTs to kick off a bigger project that the project plans to unfold over time with a game component, merch or an event. The rug pull comes in when they run off with the millions of dollars raised before any of the promised actions can take place. In many cases, this happens quickly, but there have also been instances of slow rug pulls where the project is gradually abandoned, with a lack of updates and new developments.
The best way to avoid falling into the trap of a rug pull scam, is to DYOR. Investigate the team behind the project and evaluate their long-term business plans.
Follow the project on Twitter, Discord or other public forums, because for an NFT project to have good liquidity or lasting artistic value, there should be a sizable active community of engaged investors.
To learn more about how to evaluate an NFT project, check out the article on 6 Key Indicators to Evaluate NFT Projects.
6. Counterfeit NFTs
Minting a digital file as an NFT doesn’t make it a new piece of intellectual property or give you ownership of it. Instead, this simply turns a digital file into something that you can store on blockchain.
Scammers can easily steal a digital creator’s work and open an account on an NFT marketplace where they list the counterfeit piece for auction.
If you purchase the counterfeit NFT, this would make your NFT worthless once the community realizes it’s not the real deal, and there would be no way to get your money back.
How can you avoid this scam? Before bidding on the NFT, check the seller’s Discord or social media profile for a verification tick for added credibility.
Moreover, instead of searching for a collection directly on an NFT marketplace, use the official link from the creator’s social media account and bookmark the page to avoid phishing. The potential pitfalls of not doing your own due diligence are many, and a simple web search will return many cautionary tales.
7. Pump and Dump Schemes
Another thing to watch out for are so-called pump and dump schemes.
In this case, the term refers to when a person or group aggressively buys up a ton of NFTs to artificially drive up the demand.
They do this within a short period to make it seem like the NFT is popular, and once it gets attention, they will cash out when the selling price hits the amount they’re comfortable with. Leaving the highest bidders behind with worthless assets.
With that said, always review the transaction history of the NFT you want to purchase. Several transactions made around the same date could indicate a pump and dump scheme.
How do you protect yourself from NFT scams?
Now that we’ve covered some of the more common NFT scams, here’s five tips you can follow to protect your NFT collection online.
Don’t blindly click: Never click on links or attachments from unknown sources. And when it comes to seeking help regarding issues on an NFT platform. Always look to the official customer service on official NFT trading sites for help instead of someone who contacted you via other platforms like social media.
DYOR on NFT Projects: Scrutinize the project’s website, roadmap, social media channels, and creators’ biography before investing in NFTs, to assess the long-term value of your investment.
Check the contact address: The address should specify where the NFT was minted. If you’re not sure, check the creator’s website to make sure the information is genuine.
Be smart with your wallet credentials: Keep your seed stored in a safe location, and don’t share it with anyone or keep a picture of it on your phone. Moreover, use strong passwords and enable two-factor authentication (2FA) to enhance the security of your accounts.
Use legitimate wallet apps and browser extensions: There are a lot of malicious apps impersonating official ones. Download your wallet app or browser extension from the legitimate, official site to avoid getting phished.
While it’s clear that the technology behind NFTs has the potential to revolutionize the digital world, the NFT space is still in its infancy. All the hype in the space can make it hard to determine who is a trustworthy creator and who is a bad actor. So stay alert, and always DYOR before you invest in a digital asset.