The NFT industry offers solutions for artists and creators, but it provides opportunities for scammers to commit crimes as well. What are the most common types of NFT scams and how to avoid them?

From 2020 to 2021, Non-fungible Tokens (NFT) have a breakthrough in terms of public recognition. Unfortunately, popularity also comes with risks, as the NFT boom has caused scammers to look for opportunities to earn illegal money.

Most NFT scammers commit crimes by accessing an NFT account. They do this using various methods to get NFT holders to hand over the keys to their private wallets. Once scammers successfully break into the account, they steal at the speed of light before users even know they've been robbed.

What if the scammers fail to get the login details? They will search for other ways to commit fraud in more sophisticated ways, which will be discussed in this article. Let's take a look at the most common NFT schemes and how to avoid them below.

nft scams

 

 

1. Phishing

When asked what cases of NFT scams are the most common, the answer is phishing. Phishing is a fraudulent act of sending emails or messages claiming to be from reputable companies that usually contain a link. When clicked, the link would automatically direct the victim to a page that induces individuals to reveal personal information.

In February 2022, scammers managed to steal nearly $1.7 million worth of NFT in a phishing attack against OpenSea's users, one of the leading NFT marketplaces. OpenSea asked users to update their contact details, but scammers managed to copy OpenSea's email credentials to send links pointing to fake websites.

Phishing targets your crypto wallet too. Assuming that you have a MetaMask wallet for buying and selling NFT, scammers will aim at your wallet via ads, apps, and websites―often by email or popular social media channels and forums like Twitter and Discord―to ask for your private key or recovery phrase. Thinking you're accessing a genuine MetaMask site, hackers use keylogging or spyware to break into your account and drain your wallet.

How can you mistake a real site for a fake site? Unfortunately, the degree of resemblance to a real company is impressive, and it takes a keen eye to spot minor differences that are usually found in URLs or site layouts.

 

How to Avoid

If you are promised to get free NFT only by clicking on a link, it's most likely a phishing scam. You can steer clear of this by checking the URL, especially when you need to log in or sign up using personal information. Remember that the initial phrase or password is confidential and should not be known to anyone.

If you maybe receive an email that appears to be from a crypto exchange, NFT developer or creator, or your favorite NFT game, don't click on the link right away. Search it on Google first and access the site to prevent possible phishing scams.

 

2. NFT Giveaway (Airdrops)

Have you heard of crypto airdrop scams? Usually, you will see tweets from platforms or people claiming to be Elon Musk or famous influencers and promising free crypto. Similar to crypto airdrops, scammers promise to give high-value NFT assets for free.

Also known as NFT giveaway scams, the scheme occurs when scammers ask you to sign up on their website in exchange for free NFT. While some of the NFT rewards are genuine, many are scams.

After signing up, scammers will send you a link that requires you to enter your wallet details to receive the prize. In this position, the fraudster can copy the account information and use it to access your NFT collection.

The purpose behind this scam is for you to connect your crypto wallet with a site created by scammers. As such, they would be able to snatch cash, crypto, or NFT on the account.

 

How to Avoid

Most importantly, you must verify whether the NFT airdrop project is legit or not. If you are hesitant, ignore the airdrop offers altogether, except those provided by trusted platforms. To keep your investment safe, nowadays exchanges like Coinbase insure your assets. However, if the account leak is caused by your negligence in giving the password to someone else, the exchange will not cover it. You can also consider utilizing hardware wallet that you can use offline.

 

3. Bidding

Like a collection of valuable artworks, NFTs are often purchased through bidding. In bid fraud, the perpetrator is the buyer who deceives NFT sellers by paying less than the agreed price.

Bidding scams are common in the marketplace where NFT auctions usually take place. Scammers will place a very high price that tempts NFT creators and owners to sell it to them. Then, the scammers will change the cryptocurrency used for the offer without the other party's knowledge. For instance, the victim would probably receive DOGE10 ($0.68 at the time of writing) instead of ETH10 (approx. USD15,810) as promised.

Another way that scammers often do this is to add and remove NFT lists from the market and change the NFT prices. Regardless of the changes, sellers may end up receiving less than the amount they initially saw.

 

How to Avoid

In order to stay away from this scam, check the NFT price before starting a transaction and what crypto coin is used as a means of payment. Be diligent in checking the value of cryptocurrencies in the market to avoid losses. DOGE may have skyrocketed a few months ago, but if you aren't up to date, you might still think Dogecoin's price is high when in fact it has dropped drastically.

 

4. Counterfeit NFT

Just like fine art, paintings, and other works of art, NFT can be faked. As we know, it takes a lot of time and effort to create an NFT collection. So when their work is copied by someone else, it really hurts.

In OpenSea, you can easily convert any image to NFT whether you own the copyright or not. Scammers take advantage of this leeway by selling fake NFTs and misleading buyers that the NFTs being sold are legitimate, when in fact they are plagiarized. Newbies will surely believe that they are investing in original artwork and are buying it at a high price.

Recently, OpenSea reported that more than 80% of NFTs minted on its platform are fake. So, if you've ever bought a painting from a world-famous artist, chances are you're buying a copy.

 

How to Avoid

As soon as the NFT you purchased is proven to be counterfeit, its value will be lost. That's why you should verify before making a purchase. Be sure to check the seller's history and profile to confirm whether the artwork is genuine or fake. You can prevent this scenario by buying from a verified account. Besides, you can contact the artist via social media to confirm whether the NFT being sold is their creation.

Even if you have purchased from a legitimate platform, make sure the NFT being sold is one of a kind. NFTs are unique original creations, so there can only be one for each item. If you want more accuracy, check the smart contract address of the NFT you purchased. Still not sure? Ask an expert to check the authenticity of an NFT before you buy it.

 

5. Pump and Dump

Not only meme coins, but NFT is also the target of pump and dump. Usually, NFT scammers will use false information to push up the underlying price of an NFT asset. They will build hype in a short time around an NFT so that victims will be lured to buy it. Once the price rises to a certain level, scammers sell it and leave clueless buyers empty-handed.

Fraudsters use social media and celebrity endorsements to build a frenzy around NFT. In many cases, they pour money into NFTs, driving up prices and making it difficult for investors to ignore them. This kind of scam involves a person or group of individuals buying large amounts of NFT to artificially create a false assumption that the asset is in high demand.

 

How to Avoid

You can bypass pump and dump by reviewing the transaction history and records of the NFT you are interested in. In addition, tools like Etherscan can help you view transaction history on the Ethereum blockchain. Take time to research the reasons for the increase in an NFT. If you suspect a pump and dump, you should just leave it.

 

EndNote

As time goes by, cybercriminals are getting smarter and more innovative in finding new ways to deceive people so you might think twice about investing in NFT. As long as you stay alert and know how to spot them, you can stay safe in the NFT community.

On top of that, to secure your NFT, creating a strong password and enabling two-factor authentication on your private wallet can help reduce the risk of being scammed. See how on this page.