NFT Scams Explained: What to Watch Out For and How to Stay Safe

The non-fungible token (NFT) market has exploded in recent years, capturing the imaginations of collectors, artists, and investors alike.

With the market's value surpassing $23 billion last year, according to DappRadar, NFTs have become a significant part of the digital landscape. However, this rapid growth has also made it a target for scammers seeking to exploit the uninitiated.

In this blog, we delve into what NFTs are, how common scams operate, and how you can protect yourself from falling victim to these schemes.

What are NFTs?

Non-fungible tokens (NFTs) are unique digital assets representing ownership of items such as art, music, videos, and games on a blockchain. Unlike cryptocurrencies like Bitcoin or Ethereum, each NFT is one-of-a-kind, making it impossible to exchange one NFT for another of equal value.

This uniqueness allows collectors to own digital items akin to physical collectibles.

How Do NFT Scams Work?

NFT scams typically involve fraudsters aiming to access an individual's NFT account to steal their assets. These scams often use phishing tactics, tricking victims into revealing their private wallet keys through fake emails or messages posing as legitimate NFT platforms.

The allure of NFTs has captivated many, with the market reaching a staggering $23 billion last year alone, according to DappRadar.

Are NFTs The Golden Goose or Just Fool's Gold?

Scams have always been a significant threat to cryptocurrency investors, and NFTs are no exception. Even as security measures improve, hackers will still find sophisticated ways to lure and trap you in different NFT scams.

Over the last few years, NFTs have undergone a paradigm shift and are now seen as mainstream investment options. However, understanding their authenticity and technical facts can be a tough nut to crack for many investors.

Bored Apes NFTs now cost less than they did before NFT mania began three years ago. NFTs from this collection are now being traded for under 10 ETH, approximately $33,000, for the first time since August 2021. This marks a 90% drop from their peak value of $350,000 in May 2022.

Curiosity Killed the Cat (And Your Crypto Wallet)

There are two types of NFT buyers in the market. The first type is aware of the legitimacy and the working mechanism of NFTs. The second type is less proficient but still considers them good investments.

Unsurprisingly, the second type is more likely to fall for NFT scams because scammers target less experienced people in marketplaces.

Most Common NFT Scams & How to Avoid Them

Duplicated or Plagiarized NFTs: Buy One, Get None

Duplicating original NFTs is a common scam where scammers copy an artist's work and create fake NFTs, listing them for auction as if they were the original. These counterfeit NFTs often deceive buyers into believing they are purchasing genuine pieces, only to end up with worthless art. This not only harms buyers financially but also undermines the trust in the NFT marketplace.

How to Avoid It:

To protect yourself, always research the seller on multiple platforms. Cross-check their social media profiles, and look for a verification tick on platforms like OpenSea, which signifies authenticity. Engage with the community and ask for recommendations on reliable sellers. Always buy from verified sellers and be cautious of deals that seem too good to be true.

Phishing Scams are like a Bait & Switch

Phishing scams are prevalent in the NFT space, involving fake advertisements, phone calls, or emails that request private wallet keys or security keyphrases. Scammers create convincing imitations of official communications, luring unsuspecting users into providing sensitive information. Once they have access, hackers can steal your digital assets and potentially your identity.

How to Avoid It:

Vigilance is key. Always check the domain URL before interacting with any site or email. Verify activities associated with your wallet only through official domains like MetaMask.io. Never click on suspicious links or ads, and be wary of unsolicited communication asking for personal information. Using two-factor authentication and regularly updating your security settings can provide an additional layer of protection.

Rug Pull Scams: When the Floor Disappears

Rug pull scams involve promoters who hype up an NFT collection through social media, creating a frenzy of interest and investment. Once they have collected enough money, they abruptly disappear, causing the market price of the NFT to plummet and leaving investors with worthless tokens. These scams are particularly devastating as they exploit the excitement and trust of the community.

Image by NFTevening

How to Avoid It

To avoid falling victim to a rug pull, conduct thorough research on the project team and their past collections. Look for transparency in their operations and high engagement on their social media profiles. Be wary of conflicting information or teams that are unresponsive to inquiries. Checking the credibility of the team through third-party reviews and community feedback can also provide valuable insights. Always approach new projects with a healthy dose of skepticism and due diligence.

Sneaky Bidding Scams

Bidding scams are common in the secondary NFT market. Here’s how it works: a scammer places a bid on your NFT, but instead of using a well-known cryptocurrency like Ethereum, they switch it to a less valuable one at the last moment. If you’re not paying close attention, you might accept the bid, thinking you’re getting a good deal, only to realize later that the currency is worth far less than you expected.

How to Avoid It:

Always double-check the currency listed before accepting any bid. Familiarize yourself with the value of different cryptocurrencies and never rush into accepting bids. Setting a clear minimum acceptable bid in a known cryptocurrency can also help prevent this type of scam.

Pump and Dump Scams Led by Fake Hype

Pump and dump scams are notorious in the NFT world. Scammers artificially inflate the demand for a particular NFT by creating a buzz through social media, fake endorsements, and hype. Once the price skyrockets, they sell off their NFTs at a high price, leaving other investors with worthless tokens as the price crashes.

How to Avoid It:

Always check the price history and wallet records of an NFT collection before investing. Be cautious of sudden price surges, especially if the project is relatively unknown. Research the community engagement and the legitimacy of the endorsements. If something feels off, it’s better to steer clear.

Airdrop or Giveaway Scams: Too Good to Be True

Airdrop scams involve scammers posting fake NFT giveaways on social media, claiming to offer free NFTs in exchange for certain actions, like sharing a post or clicking a link. These links often lead to phishing sites where users are prompted to enter their wallet credentials. Once entered, scammers can easily steal the user’s assets.

How to Avoid It:

Never click on links unless you are sure of the website’s legitimacy. Always verify giveaways or airdrops through official channels and double-check the URL for any inconsistencies. Remember, if an offer seems too good to be true, it probably is. It’s always better to err on the side of caution and avoid unsolicited giveaway links.

https://support.metamask.io/privacy-and-security/staying-safe-in-web3/nft-airdrop-scams/

Technical or Customer Support Scams

Imagine you’re scrolling through social media and suddenly get a message from someone claiming to be from the support team of a well-known NFT marketplace. They say they noticed an issue with your account and need your wallet information to fix it. Sounds helpful, right? This is a classic technical or customer support scam. Fraudsters posing as support staff reach out to users, asking for sensitive information under the guise of helping with an issue.

How to Avoid It:

Official support teams rarely, if ever, reach out to users directly via social media. If you receive such a message, do not provide any personal or sensitive information. Instead, contact the official support team directly through their verified contact methods listed on their official website. Always verify the identity of anyone claiming to be support staff before sharing any details.

Website Scams

Website scams involve scammers creating near-perfect replicas of popular NFT marketplaces. These fake websites look almost identical to the originals, tricking users into buying NFTs or entering their wallet information. Once you make a purchase or enter your details, your assets are at risk.

https://www.pcrisk.com/removal-guides/29885-usdt-nft-airdrop-scam

How to Avoid It:

Always double-check the URL of the website you are visiting. Genuine marketplaces have secure (HTTPS) URLs and clear, consistent branding. Avoid clicking on links from unsolicited messages or pop-ups. Bookmark the official website and use it to access the platform directly. If you have any doubts, research the website's legitimacy through community forums and reviews.

Fake Influencers are like the False Prophets

In the world of NFTs, influencers can wield significant power. Scammers take advantage of this by creating fake endorsements from celebrities or influencers to promote their NFT projects. These fake influencers lure unsuspecting investors into buying or investing in their scams by leveraging the trust people have in their favorite public figures.

How to Avoid It:

Always verify an influencer’s association with an NFT project through their official social media handles. Look for posts or announcements directly from the influencer. Be skeptical of projects promoted solely through paid ads or unfamiliar accounts. Cross-reference information and look for independent reviews and discussions about the project.

Stealth Drop Scams

Stealth drops are supposed to be exciting, secretive events where rare NFTs are released without prior announcement. However, scammers exploit this concept by creating "stealth drop" NFTs, promising quick riches and exclusive access. These scammers often use closed Discord channels and create a sense of urgency to entice users to buy quickly, only to vanish with their money.

How to Avoid It:

Be wary of closed or private channels promoting stealth drops. Verify the legitimacy of the project through community discussions on well-known platforms like Discord or Twitter. Look for transparency from the project creators, and be cautious of any project that pushes for quick investment without clear, verifiable information. Always approach sudden drops in value and too-good-to-be-true offers with skepticism.

NFT Scams Are Here to Stay

There will always be scams in every money-making market. While they can't be entirely eradicated, they can be avoided if investors are careful. Knowing the types of NFT scams and how to avoid them is crucial for every market participant.

Web3 tools like wallets (e.g., MetaMask) for secure transactions and smart contract auditing tools for verifying project integrity are essential in the NFT space. Additionally, Web3 survey software helps users gather trusted feedback from the community, ensuring projects are legitimate before investing.

Now Imagine a Tool That Could help you identify if an NFT is legit or not.

Yep, that’s exactly what we at QuillAudits are building.

Why Choose QuillCheck to Evaluate NFTs Before Investing?

Stay Smart, Stay Safe

The NFT market has grown tremendously, but so have the scams. Security challenges are at an all-time high. Experts warn investors to be cautious, emphasizing research, two-factor authentication, and verifying all information before taking any action.

Keep greed at bay, stay alert, and you can avoid falling victim to NFT scams.

Remember, "He who is greedy is always in want."

Stay curious and hungry, but always be cautious.