The NFT market has given creators and designers new ways to sell their work, but it has also given fraud artists a way to take advantage of unsuspecting victims’ crypto and JPEGs.
Let’s look at some of the scams that have been accomplished in defrauding collectors of millions of dollars since the NFT market’s inception.
1. Phishing scams
You will require a cryptocurrency wallet that supports the ERC-721 standard in order to buy an NFT that is based on Ethereum (ETH). The most well-known wallet among NFT producers and collectors is probably MetaMask.
However, phishing scams using bogus advertising, apps, and websites that request users’ private keys or recovery phrases have been aimed against MetaMask wallets. The information is then used by malicious actors to empty your cryptocurrency wallet of all its funds.
By keeping in mind that all you require to backup or recover your money is your seed word, you may stay clear of this fraud. Never divulge your secret key or recovery phase to anybody.
2. NFT airdrop scams
Malicious NFT project websites are made by scammers with the promise of free NFT prizes. While some NFT freebies are legitimate, the majority are frauds.
The purpose of this scam is to get you to connect your cryptocurrency wallet so that, once you do, harmful malware may be used to steal your cryptocurrency assets from your wallet.
Verifying the NFT trading platform or project on social media can help you prevent this, as can staying away from NFT airdrops altogether (unless they are being held by trusted platforms).
3. Pump and dump schemes
Pump and dump strategies are used by NFT scammers to intentionally inflate the price of their NFT collection so they may profit. To do this, they place a number of offers quickly in order to create excitement about the NFT drop. Once prices reach a certain point, the scammers cash out, leaving ignorant consumers with NFTs that they significantly overpaid for.
Examining the transaction history and wallet data of the NFT collection you are interested in will help you avoid this fraud. On NFT marketplaces like OpenSea, you can view the quantity of transactions and purchasers for the NFT collection. Etherscan also gives you access to the Ethereum blockchain’s transaction history.
4. Bidding scams
When you try to sell your NFT to the highest bidder on the secondary market, bid frauds frequently happen. Scammers may change the cryptocurrency utilized after you list your NFT and a potential buyer submits the highest bid without informing you. In this manner, rather than obtaining the agreed-upon 10 ETH, you really receive 10 USD.
Checking the transactional currency before you start the transactions will help you prevent this scam.
5. Counterfeit NFTs
It is not the same as owning the original or having intellectual property (IP) over a work of art if it is minted as an NFT.
You may convert any image into an NFT on a platform like OpenSea, regardless of whether you hold the rights to it. By copying NFTs from another user’s work, scam artists trick people into thinking they are purchasing a genuine NFT before putting the fake up for auction on an NFT marketplace. The buyer ends up purchasing a fake piece of art, which loses all of its worth once the community learns about the scam.
By ensuring that any NFT you buy on a marketplace is from a verified account, you may avoid this situation. To verify ownership of the NFT, you can also contact the artist via social media platforms.
6. Customer support impersonation
Scammers exploit social media platforms for NFT projects, such as Telegram and Discord, and pose as customer support. In order to steal the assets stored in the wallet, they want to obtain the users’ private wallet keys.
Make sure you only access a certain Discord server or Telegram channel through an NFT creator’s official page or website to avoid falling for this scam.
Additionally, avoid engaging with random people online who identify as customer service representatives for NFT projects or companies. After you have requested assistance, real customer care will only communicate with you through channels you can trust.
7. Social media impersonation
Cybercriminals frequently construct fictitious social media accounts for NFT projects, similar to customer support impersonation scams, with the goal of luring people to a bogus NFT project website or marketplace where they can connect to a harmful smart contract to access their victims’ wallets.
Scammers are unfortunately as widespread in the NFT market as they are in the larger crypto environment. Therefore, it’s crucial to follow fundamental cybersecurity best practices, such as verifying the legitimacy of any website, service, or platform you use and avoiding connecting with strange people who are giving you anything for free on social media.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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