Just as NFT sales leaped over the $4 billion mark at the start of 2022, talks of scams in the sector spread like wildfire. From phishing attacks to fake giveaways or malicious investment schemes, scammers have taken advantage of the rising popularity of NFTs to con people out of their hard-earned money.
To the uninitiated, NFTs (non-fungible tokens) are digital assets that are unique and cannot be replicated. They are stored on a blockchain and can represent anything from art and collectibles to in-game items and even real estate. The immutability of NFTs makes them ideal for use cases like ownership verification, copyright protection, and supply chain management.
However, the same features that make NFTs valuable also make them a prime target for scammers. Let’s take a look at some of the most common NFT scams and how you can avoid them.
Phishing Attacks
One of the most common ways scammers exploit people is through phishing attacks. Phishing is a technique where attackers send out fake emails or messages that appear to be from a legitimate source in an attempt to trick the victim into revealing sensitive information like passwords or credit card details.
The scammers usually create fake websites that look identical to the real thing, and when you click on a link in their email or message, you’re taken to this fake website, where you’re asked to input your personal information.
Phishing usually works something like this:
- The scammers usually create fake websites that look identical to the real thing.
- When victims click on a link from an email or social media they are taken to the fake site.
- The victim enters personal information like a seed recovery phrase.
- Scammers liquidate the victim’s accounts/crypto
Phishing attacks in the NFT space are not new. There have been several high-profile incidents where scammers have managed to steal millions of dollars worth of NFTs by tricking people into sending them to a fake address.
Examples worth mentioning are scammers who use Discord DMs to trick NFT holders into sending their assets to a fake version of the popular MetaMask wallet or those who send out fake emails purporting to be from the NFT marketplace OpenSea, asking people to click on a link to claim their reward. Scammer hang out on an NFT collection’s community Discord chat group and send DMs to community members who troubleshoot on the platform.
To avoid being scammed in this way, always double-check the URLs of the website you’re visiting and make sure it’s a legitimate site. If you’re unsure, contact the company directly to confirm. Also, be very careful about clicking on links in emails or messages, even if they appear to be from a trusted source. If possible, type in the URL yourself to be sure you’re going to the right place.
And don’t forget, if something sounds too good to be true, it probably is! Be skeptical of any message or email that promises free NFTs or rewards, as this is usually a scam.
Fake Giveaways and Airdrops
Another common scam in the NFT space is fake giveaways and airdrops. These usually take place on social media platforms like Twitter, where scammers create fake accounts that pose as well-known figures in the industry — like Vitalik Buterin or Elon Musk — or as official accounts of popular NFT marketplaces or collections. They then post tweets promising free NFTs to those who send them a certain amount of cryptocurrency (in this case Ether).
Of course, there is no such thing as a free lunch in the NFT space, and if you fall for this scam, you’ll simply end up losing your cryptocurrency with nothing to show for it. In some cases, the scammers create useless tokens together with even more worthless NFTs that they send to influencers’ wallets to imply that those social media influencers are backing the scam project.
So how can you avoid being scammed in this way?
First of all, be very skeptical of any social media account that promises free NFTs, no matter how legitimate it looks. If you’re unsure, check to see if the account is verified (most official accounts are). Also, be sure to do some research on the account to see if it’s a known scammer. You can usually find this information by doing a quick Google search.
Another way to avoid being scammed is to not click on any links in tweets or messages promising free NFTs. These are almost always scams. If you’re interested in an airdrop or giveaway, go to the official website of the company or collection running it and follow the instructions from there.
Investment Schemes
NFTs have become very popular in recent months, and as a result, there has been an influx of new investors looking to get involved in the space. However, many scammers are looking to take advantage of these new investors.
One of the most common scams is the so-called “pump and dump” scheme or “rug pulls.”
In this type of scam, the scammers create an NFT collection with an elaborate roadmap that goes beyond NFTs to include a video game aspect, a social network, and even a movie. They then promote this collection heavily on social media, often using celebrity endorsements to convince people to invest in the long-term outlook of the project.
Once they’ve managed to get a lot of people to invest, they “dump” the collection by selling all of their tokens at once, causing the price to crash. Those who have invested are then left holding the bag, so to speak, with worthless tokens that they can’t sell and a worthless project.
To avoid being scammed in this way, it’s important to do your research before investing in any NFT project. Don’t just take the word of social media influencers or celebrities; read the whitepaper and understand the project thoroughly. Keep in mind that big projects with massive potential don’t just appear out of nowhere; they usually have a long development process with massive teams and partnerships.
This one is more nuanced because there is no guarantee that your NFTs are ever going to be worth tons of money but try to only invest in good projects where you know the artist/people behind it.
What Tools Can I Use to Stop NFT Scams?
Several tools are available for use in stopping NFT scams. You can use a service called revoke.cash to check what sites have permissions to engage with your wallet.
If you realize that you’ve been scammed, you can revoke the transactions before they happen; however, the tool cannot return monies lost.
You can also use hardware wallets such as Ledger and Trezor to secure your private keys. Plus, you can report scams to the NFT Anti-Scam Task Force.
Finally, you can put additional safety measures on your accounts, such as 1Password for easy password storage and two-factor authenticator apps such as Authy and Goggle Authenticator.
More Questions About NFT Scams
An NFT is a non-fungible token, which means it is a unique digital asset that cannot be replaced by another asset of the same type. NFTs are often used to represent ownership of digital assets like art, music, or in-game items.
No, NFTs are not a pyramid scheme. While there are some scams associated with NFTs, the technology itself is not a scam.
No, you cannot get rich quickly by investing in NFTs. Like any investment, there is always a risk involved, and you could lose money. You should only invest what you can afford to lose.
An NFT marketplace is a platform where you can buy, sell, or trade NFTs. Some popular NFT marketplaces include OpenSea, Rarible, and SuperRare.
The best way to avoid being scammed is to be vigilant and do your own research before investing in any NFT project. Don’t just take the word of social media influencers or celebrities; read the whitepaper and understand the project thoroughly. Keep in mind that big projects with reputable teams tend to be more reliable.
You can avoid being scammed by doing your own research, being skeptical of social media accounts that promise free NFTs, and not clicking on any links in tweets or messages promising free NFTs. You can also avoid being scammed by not investing in any project that you don’t understand thoroughly.
