NFT scams and crypto-based scams are becoming increasingly more sophisticated, and a lot of people have fallen prey.
NFTs and the Crypto market are looked at as cash cows by many newcomers. Rightly so, as thousands of people have made millions by getting into the market and catching the right trends. However, plenty of people have fallen victim to all kinds of different scams, and we should all be wary of some tale-tell signs of scammers.
For those who are new to the scene, NFTs are also powered by blockchain technology, similar to crypto coins. The NFT prices vary for different reasons as each NFT is a unique token. The art market boomed in 2021, as collectors paid millions for art NFTs. But, NFTs don’t have to be limited to art pieces. They could be anything from tweets, written word, virtual real estate, your car’s papers, contracts, and more. If you have your digital assets listed in an NFT marketplace, somebody can buy them.
There is so much money in this market, it shouldn’t come off as a surprise that fraud, scams, and phishing have also consistently been on the rise.
Here are a few scams every NFT user should know about.
Fake Personas and Catfishing
It’s easy to be catfished in the NFT trading business since all sales happen virtually. NFT marketing is done mostly via social media, and a lot of companies hire influencers and celebrities to promote their NFTs. This makes it quite difficult for an average person to figure out whether or not these NFT projects are real.
It’s easy to get lured into an idea that promises bank, and that’s exactly how the scammers get you.
To Avoid Fake Persona NFT Scams
Do not take a word of an Instagram model to make your NFT purchase. Instagram page metav3rse posted interesting stats on NFT projects promoted on Instagram.
While the project might be legit, you will want to do your due diligence before spending your money.
Another common fake persona scam starts in the DMs. If you receive a DM on your social media by someone claiming to have the next big thing, don’t buy it. Also, a lot of these scammers claim to be a CEO, CMO, or someone important and they want to change your world. The general rule of thumb is that if they claim to be super important with the NFT project to make you a millionaire, it’s a scam. Also, avoid clicking on any links and revealing any secrets.
Fake or Replica NFT Stores
Replica or fake online stores are common in the world of fraud, and we’ve already started seeing fake NFT stores.
According to a study, suspicious domain registrations with names of popular NFT marketplaces like OpenSea, Rarible, Solsea had increased by nearly 300% towards the end of March 2021 when compared to previous months. As we head into 2022, we can definitely count on those numbers being even higher.
The replica or fake NFT stores could look similar to the NFT marketplaces like OpenSea, or online Gucci store. They might be using a similar website layout, the original logo, or a variation of the real brand’s images.
They might also be offering huge discounts, and they intend to capitalize on the shopper frenzy.
To Avoid Replica NFT Stores Scams
Replica store URL might look like: hxxps:// opensea123$.xz
These websites are designed to look similar to the original so that users might put in their login details and other information on the site.
You should also keep an eye out for fake pop-ups that link to normal-looking login pages. As a caution, always check the URL of the site you are on. Also, do not put your login information to your crypto wallet and NFT marketplace on any other website but the original platform you trust.
Pump and Dump Schemes (Money Laundering)
Pump and Dump schemes refer to when an NFT project is driven up in price artificially by a group of people. The schemers buy and sell a bunch of NFT projects to themselves and drive up demand for the said NFT. When the price is high enough, they cash out leaving behind those who weren’t in on it from the start with useless NFTs.
Another term you should be familiar with in the NFT world is “paper money”. It’s not exactly a scam, but they do not have enough liquidity and can be risky. If you are buying NFTs as an investment, you should look at projects that have more buyers and therefore more liquidity.
To Avoid Pump and Dump Schemes in NFT
The first thing you wanna do is check the wallet records of the NFT projects you’re interested in. Because NFTs are based on blockchain technology, their transparency allows you access to all the records. On any NFT marketplace, like OpenSea, Rarible, etc, you can check the number of total transactions as well as the buyers for the NFT collection.
Something to keep in mind is that if any NFT project is only exchanging hands between the same ten people, you might want to steer clear. Also, keep an eye out for the latest news and happenings of the NFT project on platforms like Twitter, Discord communities, etc. Every good NFT project should have a bunch of investors engaging in discussions and sharing information.
Counterfeit NFTs, Brand/Artist Impersonation
NFT marketplaces like OpenSea have made it really easy for users to create NFT projects or collections. So, virtually anyone could create an NFT for a piece of art, even if they do not own the rights to that IP.
You should remember that minting a piece of artwork as an NFT does not make that person the owner of the art piece. For instance, you could mint an NFT of DaVinci’s Monalisa, but that wouldn’t make you the owner of Monalisa.
Counterfeit NFts would be valueless once the NFT community finds out about the scammer, and by that point, you will have lost your money.
Plagiarism and counterfeiting are age-old schemes, and it’s bound to increase as it is difficult to verify the seller online. Counterfeit NFTs are not exclusive to art NFTs, and all users should be careful.
To Avoid Counterfeit NFTs Scams
Do your research on the art piece before you make your NFT purchase. You will also want to look at the account to ensure it’s verified, and check the transaction history of the account. A lot of NFT marketplaces implement blue checkmarks to ensure the legitimacy of the artists.
If your artist is an up-and-comer, you won’t be able to find the blue checks, so dig through their Twitter handles, websites, and other social proof they might have. Always follow official links from the project/community’s discord server.
If someone you don’t know, or know, sends you a “Join the Giveaway” link to get free bitcoin or free NFTs, it’s probably a scam. Let’s start there! Why would anyone hand out something of value freely, let alone NFTs worth thousands of dollars?
Giveaway/Airdrops might be a combination of multiple schemes we have talked about previously. Scammers might be impersonating brands, or phishing to make you log in to their shady website.
To Avoid Giveaway/Airdrops NFT scams
If something looks too good to be true, it probably is. If a direct message you received starts with, “it’s your lucky day”, it’s probably a scam. These schemes generally ask you to fill up a form, log in to your crypto wallet, add credit card info, and/or transfer money to an account.
Why are NFT scams so common?
NFT market is relatively new and it’s still in the initial stages. Despite that, the market has a lot of money exchanging hands on a daily basis. Some have started in the NFT world with genuine intentions, while others are in it for the quick buck. Since a lot of people barely know anything about NFTs and see it as a cash cow, scammers take advantage of the newbies.
It’s not newbies who fall victim to NFT scams either. NFT creators and buyers need to understand that creating an NFT project is like starting a startup, and some investors fail while other startups succeed.
Educate yourself to Avoid NFT scams
We can expect to see more and more sophisticated, elaborate scams in the future. The best thing you can do for yourself is to stay informed. Don’t chase after the money. There will be plenty of opportunities in the world of crypto and NFTs if you understand this technology. So, for now, maybe the best thing you can do is study NFTs and gear up for the future of web3.0.