NFT scams are undoubtedly very common now. Especially now that the adoption of cryptocurrencies and other blockchain-based assets is at an all-time high. This popularization of NFTs or non-fungible tokens became widespread in 2021, following the explosion of general cryptocurrency prices after the covid-19 pandemic.
This isn’t very surprising. Everyone has begun to see the real-world application of NFTs as digitized representations of real-world objects. Anyone can now create and mint NFTs representing ownership of a house, a piece of art, and many other real-world objects.
As an inevitable result of this explosion of NFT popularity, however, the number of related scams has grown exponentially as well. Many people have been scammed out of billions of dollars over the last year.
In this article, we examine seven of the most popular NFT scams. After reading, you may see a pattern, and learn how to identify future scams and how to avoid them before they happen.
Some Well Known NFT Scams
The FTC (Federal Trade Commission) estimates that Americans have lost over a billion dollars to crypto-related scams. These scams are so prominent, due to the unregulated and decentralized nature of cryptocurrencies and NFTs.
Lost crypto and NFTs are untraceable and unrecoverable. The perpetrators of these scams know this as well as anyone. It is a lot easier for them to rest easy, knowing that they may never be caught.
In 2021, there were an estimated 280,000 buyers and sellers of NFTs. Many of these buyers and sellers were newbies, looking to get in on the action after hearing some of the hype around NFTs. Many of them learned things the hard way.
Here are some scams that show the unsuspecting how risky the cryptocurrency market can be
NFT Pump and Dumps:
In pump and dump schemes, the creators of these projects keep a large amount of these scam NFTs or cryptocurrencies for themselves. They then proceed to ‘hype-up’ the low-value assets, encouraging people to invest and drive the prices up.
When prices reach a certain level, the scam orchestrators sell their holdings, crashing the prices and leaving their investors holding an empty bag.
These scammers may sell slowly or sell all at once, giving their investors no time to react.
Artists and creators have always had to struggle with their work being stolen or plagiarized. And so far, the same is starting to happen in the world of NFTs.
It is surprisingly easy to convert any regular picture into an NFT. Sometimes, these pictures can include replicas of already valuable NFTs. In scams like these, anyone could make a copy of an asset worth millions, mint them and market the counterfeit as an original.
Phishing scams are easy to fall for. Falling victim to a phishing scam can be as easy as clicking a malicious link on a fake advert. Popular places these scams happen include discord, telegram and Twitter. Newcomers to the NFT market are one of the most common victims of these scams.
Celebrity endorsements are common in the NFT market. The Bored Ape Yacht Club, for example, has Steph Curry, Tom Brady and Madonna as well-known holders. Scammers can impersonate any of these people and convince investors to buy some scam NFTs.
Outbidding scams are more common than many realize. Outbidders buy a certain NFT and change the purchase currency, hoping to sell at a much higher price than they bought. An outbidder may purchase an NFT for $1, and change the purchase price to 1BTC.
On websites containing scam smart contracts, purchased NFTs promptly disappear, or turn out to be something else after they are purchased. This is because the contracts on the scam websites are different from the contracts linked to the original NFT. So buying from a scam website may deposit the wrong NFT or nothing at all in your wallet.
Customer Support Scam
In this category, the scammers pretend to be customer support personnel for exchanges and marketplaces. They pretend to be trying to help and ask the unsuspecting to send them sensitive wallet details like their seed phrase.
Many fall for this and end up regretting it.
How to Avoid These Scams
- Do your research before buying any NFTs
- Marketplaces like Opensea have blue badges and other identifiers for their verified users. You should be wary of accounts with no evidence of verification.
- Keep your information private, and never give out your seed phrase
- Doublecheck the purchase currency before making payment, to avoid outbidding scams
- Be alert, and never part with money you can’t afford to lose