Non-fungible token (NFT) scams are becoming increasingly common in line with increased ownership and the sophistication of technology, making it easier for scammers to target investors. These are ever-changing and people are pretty smart with the sorts of scams they come up with.
In this piece, which was originally published through the NFT Club, Luci Goodman details the threats that are increasingly thwarting the promising future of the NFT space.
According to Goodman, a lack of regulation has left the space open for anyone to hire an artist to create NFTs and create a lot of hype online. This is especially easy when a great number of NFT collectors and creators remain anonymous online using digital artwork as profile pictures whilst sporting anonymous usernames.
Phishing scams
There has been a surge in replica and fake stores made to look like the original ones in order to trick users into logging in or inputting their credit card information, this is what’s known as ‘phishing’. Scammers target investors by creating fake advertisements, asking users to input their private wallet keys or seed phrases via email, Discord, Telegram and other public forums.
Scammers are also getting in touch with users over Discord and Twitter, impersonating OpenSea or Metamask support staff. This is with the aim of tricking people into exposing their security phrase or sending links to fake customer service websites, where you are asked to input your credentials.
If you are seeking technical support always go directly to official customer support websites and never share your recovery phrase.
Four top tips to avoid phishing scams:
- If you are seeking technical support always go directly to official customer support websites and never share your recovery phrase.
- Write your seed phrase down on paper and never give it out to anyone, don’t even keep a photo of it on your phone.
- If you receive a suspicious email, always check the sending email address and never open links from an unknown sender.
- The best way to verify the authenticity of the site you’re on is to use websites like ScamAdviser and Trend Micro Check. But the best bet to stay safe is to stay on legitimate sites such as OpenSea.
Pump and dump
Pump and dump refers to when a group of people buys up a bunch of NFTs and artificially drive demand up, often by spreading misleading information. When the price has risen substantially the scammer dumps the asset, causing a significant price drop and leaving investors holding NFTs worth much less.
This type of scam often targets small, barely known NFTs as their price tends to be more easily manipulated. Schemes are often also promoted by influencers and even well-known celebrities through social media, with regulation around this kind of promotion still a grey area.
Four top tips to avoid pump and dump scams:
- Be critical about what you see online. Verify the credentials by checking the history and wallet record of the project you’re interested in. You can do this on OpenSea or any other marketplace by viewing the number of transactions and buyers for the NFT collection. Also, make sure to check out the whitepaper and website of new projects.
- There can be huge pressure in the crypto and NFT community to jump on opportunities as quickly as possible, but you should never feel obligated to invest in something just because it’s what everyone else is doing.
- If an influential person or celebrity suddenly starts hyping up a new NFT collection, be wary as there is a good chance it’s a scam.
- Also follow the project on Twitter and Discord, legitimate collections with good liquidity will have an active community of investors where people talk and share information.
Counterfeit NFTs
Scammers are ripping off artists by making copy collections and trying to confuse people into buying the wrong asset. Minting an NFT is easy and means anyone can upload a photo or image into an NFT, regardless of whether they own the intellectual property rights to it. Scammers are creating fake OpenSea accounts to sell their counterfeited NFTs to investors who are then left with valueless assets.
Four top tips to spot counterfeit NFTs:
- Consider whether the price of the NFT seems legitimate and check if the contact address of the NFT aligns with that of its creators’ website.
- Does the artist have a blue checkmark to signal their verification status on OpenSea or other NFT marketplaces?
- Find the artist on Twitter or other social channels and see if you can verify the artwork as belonging to them yourself.
- Additionally, you could ask other members of the community on Twitter or discord if you are still unsure.
Ultimately you should only invest in an opportunity you are 100 per cent certain is authentic. Never send your assets to anyone directly, always use a marketplace.
And make sure you use a hardware wallet because you are at risk if you are only using a web-wallet. Most importantly, never share your credit card information and always make sure you’re on a legitimate website.
Be sure to do your research before investing, and if you are unsure, don’t be afraid to ask the NFT community.