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NFT Scams and How to Escape Them

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What Is a Scam?

A cryptocurrency scam is a kind of investment cheat involving criminals who steal money from people investing in the new world of digital currency.

Most crypto assets and services aren’t controlled by the Financial Conduct Authority (FCA), which means the Financial Services Compensation Scheme does not protect them.

Unfortunately, it’s still unlikely that you could return any money lost to a cryptocurrency scam being misguided.

We can group cryptocurrency scams into two main categories:

  1. Initiatives targeting to get access to a digital wallet or authentication credentials. Bad actors try to get information that provides them with access to a digital wallet or other types of private information. 
  2. Sending your cryptocurrency straight to a scammer because of such malicious means as false investment or business opportunities. 

 

What Is an NFT?

An NFT is a digital asset that acts as a real-world object like art, music, in-game items, a video, a document, or even your tweet. It could be bought and sold online, usually with cryptocurrency, and it is generally encoded with the same underlying software as many cryptos.

An NFT is one of a kind asset, or at least a very limited, unique one, that’s why it has unique identifying codes. This is how it differs from the rest, as most digital assets always have an infinite supply. 

Anyone on the Net can see the individual’s NFT for free. But the key to this mysterious uniqueness is that only an owner is allowed to hold their NFTs. How can it be verified? The matter is that each NFT has built-in authentication, which acts as proof of ownership. 

 

Common NFT Schemes

1. Phony Marketplaces

If you want to invest in your first NFT, the first thing you’ll probably do is to look for a suitable platform where you can buy and sell NFTs. There are many legit platforms, but as usually happens, there are also fake ones. These mock sites don’t have legitimate NFTs, so when you buy one, the site will remember your credentials from your transaction details. Above all, these sites might ask for your private keys or 12-word security seed phrases and use them to withdraw your crypto wallet of all your assets.

It’s quite easy to avoid such scams by choosing well-known NFT trading platforms, like Binance NFT, OpenSea, Rarible, and Crypto.com marketplace, for crypto transactions and never provide your personal information in links or emails. 

Don’t forget, that you only need your seed phrase when you create a hardware backup of your crypto wallet or when you recover your wallet.

2. Malicious Offers

NFT scammers pretend that they write you on behalf of legitimate NFT platforms and send you fake emails telling you that someone wants to buy your NFT. Such phishing emails make you follow the embedded link that takes you right to a fake NFT marketplace.

The button leads you to a fake page that will ask you to link your digital wallet and provide your seed phrase, allowing fraudsters to hack your wallet. 

Be aware of these malicious emails and always check and verify the sender address of any email received from an NFT trading platform.

3. False Technical Support

Another common scam is when fake customer service or technical support writes you. For example, you're having some well-known NFT platform and asking for help somewhere on a public forum. A bad actor who pretends to represent the marketplace offers their help to manage your problem. This actor might ask you to share your screen to check what's going on, making you reveal your cryptocurrency wallet's credentials. 

When you do that, they'll take screenshots of your seed phrase or the QR code linked to it. They can also redirect you to a website that looks almost identical to the real one. Then, they'll persuade you to give your personal information, your seed phrase, for example. Since that moment, your digital wallet has been easy to steal.

So, ask for help through the official NFT marketplace and check the site domain thoroughly.

4. Giveaways

Oh, everybody likes getting NFTs for free, but free cheese is only in a mousetrap, as you also remember! Scammers can reach you through social media channels and invite you to join their NFT giveaway contest. They often promise you a free NFT as long as you spread the giveaway and sign up for an account within their website, a phishing site, of course.

As soon as they get your digital wallet credentials to gain your prize, they will use what you type, get access to your account and steal your collection of NFTs. 

Always make sure you verify that person's social media accounts and double-check if the received link matches the company's legitimate domain name.  

5. Rug Pulls

This happens when a person or a group of people release an introductory collection of NFTs to promote a bigger project that the project aims to present tied to a game component or any other special event. The rug pull is when they run away with the millions of dollars taken from people, their investors. This happens swiftly, but there are also those that are slow as the project is abandoned day by day, with almost no updates and new developments.

DYOR is a key. Study the team behind the project and its long-term roadmap.

Follow the project on various channels such as Twitter, Discord, and alike because a good NFT project that wants to have good liquidity or artistic value should have an active community of engaged investors. 

6. Fake NFTs

It's not that difficult to mint an NFT, and it doesn't make it a new piece of intellectual property or provide you ownership of it. Instead, it's just something that you can keep on the blockchain.  

Scammers can easily steal work and open an account on an NFT marketplace where they list such pieces for auction. 

If you buy the fake NFT, this will make your NFT useless once the community understands it's not the real deal, and there would be impossible to get your money back. 

Before bidding on the NFT, check the seller's social media profile for a verification tick for added reliability. Plus, use the official link from the creator's social media account and save that page to avoid phishing. 

7. Pump and Dump Schemes 

In this case, a person or a group hectically buys up a load of NFTs to skyrocket the demand. 

They do this in a short period to make it seem like the NFT is super popular, and once it draws attention, they will cash out when the selling price hits the amount they find attractive. Leaving the highest bidders with worthless NFTs. 

So, always check the transaction history of the NFT you want to buy. Several transactions made around the same date could indicate a pump and dump scheme.

To learn more, read the article on a related topic.

 

How to Avoid NFT Scams?

Those were the most common NFT scams, and here are some tips on how to avoid all of them:

  • No blind clicks

Don’t click on links or attachments from unidentified sources. Always look to the official customer service and support within official NFT platforms for help instead of someone who contacted you through other platforms like social media.

  • DYOR 

Analyze the project’s website, roadmap, and social media channels thoroughly before investing in NFTs. Yeah, here you should make an effort, but once investing your money, that’s not a big deal.

  • Check the contact address

The address should define where the NFT was minted. Check the creator's website to make sure the information is real.

  • Wallet credentials under the protection

Keep your seed phrase a safe place, and don't share it with anyone. And, of course, use a strong, difficult password and two-factor authentication (2FA) to boost your account's security. 

  • Legit wallet apps and browser extensions

Set up your wallet app or browser extension only from the official site to avoid being phished.

 

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