Top 10 NFT Scams To Avoid (Updated 2023) 💀
NFT scams are an unfortunate but natural effect of the ballooning interest in non-fungible tokens that entered the economic mainstream in 2021. Wherever money is flowing, you can be sure there will be folks with malicious intent looking for ways to take advantage of unsuspecting investors.
NFT scams are synonymous with many cryptocurrency scams that emerged during the cryptocurrency boom. Sadly, many have fallen prey to such tactics, as many of these scammers employ sophisticated methods to swindle their victims. Notably, even Asian superstar singer Jay Chou recently fell prey to one of these scams, losing an approximate value of $560,000.
However, you shouldn’t be dissuaded from investing in NFTs, as you can learn how to spot these NFT scams. Our article here examines the Top Ten NFT scams to avoid.
Table of Contents
1. Phishing Scams
Phishing scams are scammers who attempt to impersonate legitimate NFT projects or team members. You’ve likely come across fake advertisements through pop-ups and fake websites that ask for your private wallet keys or your 12-word security seed phrase.
Once these scammers have your wallet’s private keys, they will proceed to hack into your wallet and deplete your NFT collection and all the cryptocurrency stored in it.
Finding where to buy and sell NFTs is the first thing you do when interested in NFT investing. An online search will flood you with millions of search results, but several fake trading websites are hidden among them. It can be difficult to differentiate fake websites from genuine ones.
One needs to sign up for a crypto wallet to be able to buy an NFT. Users of Metamask, one of the most popular crypto wallet brands, were recently targeted in a phishing scam.
You normally only have to provide your wallet address to make a transaction, but scammers may request your wallet seed phrase (the master key to your crypto wallet), use it to hack into your crypto wallet, and drain its contents.
Malicious pop-up ads are also common on other public forums like Discord, Telegram, etc.
2. Rug Pull Scams
Within the crypto world, rug pull scams are fairly common, and they occur when developers run away with an investor’s money after abandoning the project. A rug pull scam happens when a fraudulent team creates a new NFT artwork and promotes it through social media to unsuspecting investors, only to suddenly disappear with the money once enough people have invested in it.
Being anonymous helps fraudulent founding teams pull off rug pull scams, as it helps them disappear quickly and quietly.
Another variant of rug pull scams is where the developers of an NFT remove the purchaser’s ability to sell the token, as they have added a code that removes this ability.
Rug pull scams are rampant in NFT projects and can happen in three ways; by developers removing liquidity, by simply selling all their shares, and by removing the ability to sell.
It is recommended to only invest in projects where you can trust the team. Better yet if the identifies of the team members are revealed so that they would be less likely to attempt such schemes.
3. Bidding Scams
Bidding scams are very common in the secondary market, and they occur when investors are looking to resell their already bought NFT.
Once you list your NFT for sale in the market, a bidder might change your preferred cryptocurrency with crypto of low values without your knowledge, leading to potential losses. Marketplaces like OpenSea allow offering and accepting multiple cryptocurrencies when bidding on NFTs.
This switcheroo is a huge red flag, as naturally, 5 USDC ($5) can’t be the same as 5 BTC.
4. Technical Support Scams
Technical support scams are a pretty straightforward variation of phishing scams. This scam involves a scammer posing as a customer support executive for blockchain marketplaces and various NFT projects.
This scam aims to establish contact with unsuspecting buyers and demand sensitive personal information. Using official-looking websites and fake links, an NFT scammer will use the ruse of resolving issues to get your personal information and access your crypto wallet.
This scam usually occurs on popular forums with crypto supporters like Reddit, Telegram, or Discord.
5. Counterfeit NFT Scam
A counterfeit NFT scam happens when a scammer steals an artist’s work and opens a fake on a marketplace where counterfeit NFT artwork is listed for auction. An unsuspecting buyer will then purchase an NFT with no value. NFTs have seen increasing reports of counterfeits and digital theft, with artists having their work copied and sold as fakes to people as the original.
6. Pump And Dump Scams
A pump and Dump scam is when a group of buyers artificially drives up the demand for an NFT.
Unsuspecting investors believe that the NFT has some value; they then join the auction and bid some more. Once the scammer is satisfied with the price of the bid, he sells off the NFT for a profit, leaving the buyers with worthless assets.
Wash trading is also common in NFT trading. Wash trading is when the same person buys and sells an asset, which drives the price. The NFT becomes attractive to naive traders who assume they’ve just stumbled on an amazing deal or that the price will rise again.
7. Giveaway and Airdrop scams
Wherever there are cryptocurrencies, there will be giveaway scams. Giveaway scammers target cryptocurrency enthusiasts by freely offering NFTs related to different NFT marketplaces.
However, with airdrop scams, a scammer poses as a legitimate NFT trading platform on social media channels to promote giveaway campaigns of NFTs. The scammer offers you a free NFT if you can sign up on their website and spread their message.
The scammer then prompts you to link your wallet credentials to get your prize, during which they will record everything you type, gain access to your account, and steal your NFT library.
8. Fake Influencers Scam
NFTs have seen a surge in popularity, which has led to several celebrity endorsements, which profit these celebrities in different ways.
However, because sales of NFTs happen virtually and all marketing is done on social media platforms, information available to the public regarding marketing for the project is limited.
Popular NFT communities commonly hire celebrities and influencers to promote a project, making it difficult to tell the real from the fake.
Other scams involve fake celebrity endorsements. Many people are likely to have lost their money before realizing the supposed celebrity or Influencer isn’t involved with the project.
9. Stealth Drop Scam
Twitter is a great place to discover new projects. Due to Twitter’s recommendation engine, if you are active in the NFT conversations, they will often recommend NFT projects on your Twitter Feed. A recent tactic used by scammers is to create a “Stealth Drop” NFT project. Unsuspecting readers would think they’ve stumbled upon alpha with the promise of quick riches where in reality, they are being roped into a rug pull. Another red flag in Stealth Drop projects is if their Discord channel is a closed channel and you can only join via invitation. Usually they will only invite prospects who are likely to fall for the scam.
10. Replica Stores
Scammers often closely replicate some of the most popular NFT marketplaces to create fake NFT stores.
These fake sites are almost identical to the original they are impersonating and can even trick a seasoned NFT buyer into splurging their hard-earned money on a fake network with no worth.
Virtually every NFT scam either tricks you into assuming you’ve sold or purchased a legitimate NFT, or they steal the login credentials to your cryptocurrency wallet.
It is getting harder and harder to keep up with these sophisticated scams. Hence, it is advised to always do your research before interacting with any of these projects. There is no such thing as easy money. Keeping your private keys private, boosting online security, double-checking, and dealing only with official sites are a few ways to avoid being victims of these scams.
We hope these tips have been helpful. If you’ve been a victim of a scam and would like to share your story, feel free to comment below in the comments section or contact us.