From the early days of crypto and now with NFTs, scams have been a genuine threat to everyone who resides in the space. Despite advances in security measures, hackers continue to develop more advanced methods to steal our assets.
As NFTs move further into the mainstream and edge closer to mass adoption, the earning potential for scammers continues to ‘skyrocket.’ We’re witnessing a huge amount of onboarding from newbies who see NFTs as a life-changing opportunity, which it is. Although, with that comes a naivety to the dangers they are exposed to, being fresh in the scene.
Many degens will fall victim to a scam at some point in their NFT adventure, but obviously, with more experience comes the know-how in the methods of best practice. Regardless of your time in this world, this article is one you need to pay attention to as you may learn something new.
Let’s take a look at ten common NFT scams and how to stay safe.
Phishing Scams
A scam where the attacker sends a fraudulent message, usually via email, designed to trick potential victims into revealing sensitive information such as your 12-word MetaMask security keyphrase. The scammer will disguise themselves as a legitimate organization with branding that can be indistinguishable from the real thing.
A recent example of a phishing scam is when last year, MetaMask users received an email asking them to verify their wallets by inputting their security phase with the threat of restriction for any who didn’t comply. Fortunately, MetaMask got wind of this and alerted its customers but not before many fell victim and had their wallets cleaned out.
How to Stay Safe from Phishing Scams?
The most important thing you can do when coming across a suspicious email or notification, is to check the URL or address of the sender. Using MetaMask as an example, its URL is “metamask.io” meaning anything coming from something different is a scam, such as metamask.com. A simple Google search can help you identify what’s real or not.
External links should also be avoided as companies typically keep things on platform and if in any doubt at all, get in touch with customer support to confirm the legitimacy of requests.
Website Scams
Closely linked to Phishing scams are website scams. This is done by highly skilled developers who can perfectly replicate well established marketplaces. The intention behind this, is to take your currency through the sale on non-existent NFTs listed on the website.
How to Stay Safe from Website Scams?
The easiest way to stay well clear of false websites is to go directly through the ‘official links’ section of a projects Discord server or Twitter.. Familiarize yourself with domains and feel free to bookmark your favorites for quick and safe access. Links through emails or pop ups are red flags and should be avoided.
Bidding Scams
Taking place on secondary markets, a bidding scam is when the currency is changed upon listing an NFT to that of a lower value. The impact of this being that the change of currency leads to losses for the seller. For example, you list an NFT and a scammer places a bid of 10 ETH which you accept, only for them to change the currency to USD in secret.
How to Avoid Bidding Scams
Although traders do fall for bidding scams, these are easy to avoid. Just be sure to take your time and check everything is OK prior to selling your NFT. It only takes a few seconds and could save you from losing huge sums.
Rug Pulls
One of the most well known NFT scams. Rug pulls happen when an upcoming collection builds up enough hype to attract a significant amount of investment, before pocketing the money and abandoning the project. The decentralized aspect and anonymity around NFTs make this type of scam incredibly popular and easy to pull off.
Until recently there haven’t been any consequences for the scumbags who arrange these schemes. However, earlier this year, those responsible for the now infamous Frosties rug pull were charged and jailed for scamming $1.1 million from investors. Despite these arrests, rug pulls are still a real threat. In June we witnessed the team behind Pokemon inspired “Animoon”, a project shilled by Jake Paul, disappear into the shadows with a hefty $6.3 million.
How to Stay Safe from Rug Pulls
Rug pulls are an extremely dangerous type of scam due the fact that hypothetically, every single project could be one. The best course of action for avoidance is to research heavily before putting money into a collection. Are the team doxxed? Does it have a history of NFT drops, successful or otherwise? How engaged are the team with the community via Discord and Twitter? Does the roadmap seem realistic?
While sometimes it can be impossible to spot a rug pull as teams can pull things off to perfection, deep dives into every nook and cranny of an upcoming collection is the safest approach.
Pump and Dump Scams
Common in every financial marketplace including that of NFTs. Pumps and dumps occur when the value of an NFT collection is artificially driven up by a group of fraudsters looking to manipulate the market. A well coordinated pump and dumps see NFTs from the same collection bought in mass which will often trigger others buy in to drive the price up. Once this pump has been achieved, the scammers will all offload their tokens at the new, inflated price causing a massive dump in value. It’s those that get caught up in the hype that fall victim to this, although, if you’re a savvy trader you can also profit from this should you catch wind of what is happening.
How to Avoid Pump and Dump Schemes?
Be wary of any sudden, unexpected price surges you see within a collection. Use any tools you have at your disposal to analyze the historic value and try to find a legitimate reason as to why there may have been a sudden pump. Did a celebrity buy in for example? Fortunately, most marketplaces such as OpenSea will have free to use data including the facility to check wallet records which you must do.
Also, be sure to check a project’s community on Discord and Twitter, as you may find some golden nuggets of information as to why a project is suddenly pumping. Like always, it usually comes down to DYOR.
Plagiarized or Duplicated NFTs
This is when an individual or a group sells artwork as NFTs without permission from the original artist. There are also cases where duplicates of already established NFT collections are created with the intent to sell to unknowing buyers.
This issue has become rampant with online art platform DeviantArt releasing a statement in June. Within, it detailed that over 245,000 pieces of art were stolen for use as NFTs and how they plan to tackle the issue.
In regards to the problem we face with duplicated NFT collections, Bored Ape Yacht Club (BAYC) is probably the most common target here given its fame as a collection. We’ve seen countless examples of projects copying the exact style, selling these replicas for a fraction of the real thing. Recently the team behind BAYC, Yuga Labs, filed a lawsuit against artist Ryder Rips for his knockoff project “RR/BAYC”. They don’t take too kindly to any monkey business.
How to steer clear of Plagiarized and Duplicated NFTs
A few simple steps of precaution here will ensure every NFT you buy is legitimate. First of all, do some digging on the background of the team on the usual platforms such as Twitter, Discord and the project website. Secondly, only buy from verified sellers. Marketplaces such as OpenSea will display a handy blue tick indicating the project is legit.
Stealth Drop NFT Scams
Using platforms such as Twitter to target unsuspecting victims, scammers create fake ‘stealth drop NFT projects’ with the promise of mooning. These projects will usually come across as suspicious due to low engagement rates compared to followers, which can be bought. Still, inexperienced degens will fall victim to these scams as they believe they’ve encountered some hidden alpha tucked away in the corners of social media.
How to Stay Safe from Stealth Drop NFT Scams
This is essentially a case of “if it’s too good to be true, then it is”. You can also quickly check for a Discord community and if it’s non-existent or closed, then alarm bells should ring. Time in the space is key here as the more experienced you are, the more obvious these scams become.
Fake Influencer Scams
Influencers and celebrities carry so much weight these days regardless of industry. A buy in or shoutout from the right person can send a project to the moon. Scammers capitalize on this by creating fake persona’s, acting as influencers. Just remember, followers can be purchased, as can engagement meaning any approach from an ‘influencer’ should be treated with caution.
Recently, a 17 year old from Brazil fell for one of these scams when a fake influencer named “Mineeervas” stole 0.14 ETH from him with the promise of Alpha. Mineeervas claimed to have important contacts in the space, going as far as sharing private conversations with the boy, between himself and his contacts. These of course, were all faked.
How to Stay Safe from Fake Influencer Scams
As always, research is key here. Look into the background of the so called influencer to gauge their legitimacy. Also, in most cases, celebrities and influential figures will not be reaching out to offer their services as they simply have no need to.
Customer Support NFT Scams
Posing as customer support agents, scammers and fraudsters will use platforms such as Twitter and Discord to initiate contact. Once contact has been established, they will typically inform you of an issue with your account. A fake link leading to a fake website will then be provided, requesting your private wallet keys in order to resolve said issue. This scam takes aspects from many of the above methods, making it so convincing.
How to Avoid Customer Support Scams
Most entities within the NFT space will clearly state that you’ll never be contacted directly via any social platform and that all contact should be through official channels. Stick to this rule and you should be OK. If in doubt, reach out to support through proper links that can be found on websites.
Airdrop and Giveaway Scams
Scammers posing as team members for projects will reach out via social channels and prey on our desperation for quick profits. Discord is rife with this, as you’ll no doubt have an inbox full of messages informing you that you’ve been chosen for WL or free mint. Those that fall victim will be led to a dangerous website asking for wallet keys to gain access to rewards and riches.
How to avoid Airdrop and Giveaway Scams
Don’t click on these links and never share your sensitive information with anyone, they will clear your wallet without hesitation.
The NFT space provides an incredible opportunity to create life changing levels of wealth but as always, where there are vast sums of money, the scammers will follow. As the community grows so will the number of awful humans wanting to illegally take our money, especially when we finally see the bull market return. Just be extra cautious and never buy into anything, if you have even a slither of doubt.
