NFT scams — how not to be a victim

With crypto-based and NFT scams becoming increasingly more sophisticated, it’s easier to fall for them than ever. NFTs are a type of digital asset used for authenticating and owning digital content, making them valuable targets for scammers.

These cryptographic assets caught the attention of web enthusiasts worldwide after reaching an NFT market value of $87 billion in February 2022. NFTs rely on blockchain technology, which ensures authenticity and transparency for each transaction. However, as the rise in NFT popularity rose, so did public interest in ‘NFT scams.’ Searches for the term peaked at an all-time high in the first week of February 2022 on Google. The NFT ecosystem has grown rapidly, attracting both legitimate users and scammers.

The sale of NFT art has significantly declined since the heydays of 2022, but that does not mean NFT fraud doesn’t exist. The innovative technology behind NFTs continues to attract both creators and fraudsters looking to exploit vulnerabilities.

As with procuring any pricey collectable, buyers should make themselves aware of the NFT scams and fraud schemes used to deceive them. Our community has compiled this NFT scams guide to help buyers educate themselves on almost everything there is to know, from what they are to how they work.

Scams target people of all backgrounds. Falling victim to NFT scams can result in significant financial losses, making vigilance essential.

Scammers succeed because what they do seems natural to you, but usually, they are too good to be true. At MoneyHub, we want to educate our community about cryptocurrency, NFTs and safety. Awareness in the NFT space is crucial to avoid falling victim to scams. Here is our guide to help you avoid getting scammed.

What are NFTs?

Non-fungible tokens (NFTs) are one-of-a-kind digital assets exclusively belonging to an owner. They exist on a blockchain, also known as a digital ledger. NFTs are governed by smart contracts, which define ownership, transactions, and security, ensuring the legitimacy and protection of these digital assets.

‘Non-fungible’ refers to their uniqueness and protection from counterfeiting, replicating or replacing. NFTs can exist on blockchains, for example, the Ethereum blockchain, meaning you can only use Ethereum (ETH) cryptocurrency to buy or sell an NFT on this digital ledger. Digital art is one of the most popular forms of NFTs, allowing artists to monetise their work and collectors to own unique digital creations.

How do NFT scams work?

NFT scams work by either tricking you into believing you successfully purchased or sold a legitimate NFT or stealing your cryptocurrency wallet login credentials.

Online hackers and cybercriminals are drawn to the substantial monetary value associated with digital assets; therefore, they adapt their scamming methods to incorporate phishing and social engineering tactics to steal NFTs or gain unauthorised access to crypto user accounts. Scammers employ these tactics to steal funds from NFT wallets, often through phishing attempts designed to trick users into revealing their credentials.

With eye-watering five- or even six-figure price tags being charged for buying NFTs, scammers are inevitably drawn to them. Scammers artificially inflate prices to trick users into overpaying for NFTs through schemes like pump-and-dump and other market manipulation tactics. These amounts may seem substantial for a JPEG; however, NFT creators will respond with the following: utility.

Because NFTs create a digital record of ownership on the blockchain (known as ‘minting’), this digitally tokenised artwork can also serve as an exclusive membership ticket to online clubs, gaming communities, music concerts, Discord chat rooms and other metaverse experiences.

At least, that is, in theory.

However, in practice, NFTs remain a relatively new concept to mainstream audiences. Whilst blockchain enthusiasts consider them an exciting signal that mainstream crypto adoption is on its way, NFTs sadly create some lucrative opportunities for scammers due to the sheer volume of money exchanging hands. Here are the biggest NFT scams, how to avoid them and why they’re becoming so frequent.

Popular NFT scams

Phishing scams

Phishing scams involve tricking users into willingly giving over their personal information, which scammers can then use for malicious purposes. Phishing attacks often begin with unsolicited messages or emails that attempt to lure users into revealing sensitive data.

For instance, when buying your first NFT, you’ll need to sign up for a wallet that transacts on a blockchain, like Ethereum. Because MetaMask is the most popular Ethereum wallet for NFT collectors, it began to be targeted by NFT scammers. The phishing scam included fake ads that requested users’ 12-word security seed phrases. Always be cautious and avoid clicking on suspicious links in emails or unsolicited messages, as these are common tactics used in phishing attacks.

Once a scammer gets hold of your 12-word security seed phrases through a phishing attempt, they can drain all of the crypto in your digital wallet.

When signing up to purchase your first NFT, always use the right websites to open a wallet and never share your security seed phrases.

Fake and replicated NFT websites

NFT scams can be very sophisticated. Scammers often create fake websites and NFT websites that closely mimic legitimate NFT platforms, replicating NFT marketplaces and websites to deceive users into believing they are the real website and compromising their account information.

Due to the level of sophistication, users cannot determine which page is legitimate or a counterfeit one; even experienced NFT owners can be tricked by a fake website designed to resemble a real NFT platform.

NFT scams like this sadly result in individuals spending thousands on counterfeit digital artwork, thus becoming worthless on the NFT market.

Always verify the website or NFT marketplace URL you use before logging in to avoid this scam.

Bogus or fake NFT offers

Similar to the above, NFT scams include posing as an NFT trading platform or marketplace and sending fake emails to NFT owners. These phishing emails aim to get NFT owners to follow an embedded link that takes them to a fake NFT marketplace with an enticing offer. Scammers may also use unsolicited direct messages on social media platforms to send fake NFT offers, making it essential to be cautious with any unexpected communications.

Once there, you’ll be asked to log in and enter your details to obtain your NFT offer. Sadly, once you do this, scammers use keylogging or spyware to record your information and then steal your NFTs from a real NFT marketplace.

Always check the sender address of any email received from an NFT trading platform — message them and ask if they send these types of emails?

NFT giveaways or airdrop scams

“Are NFT giveaways and airdrops legitimate?”

The quick answer is not always.

NFT scammers pose as legitimate trading platforms to promote NFT giveaways, also known as airdrop scams, to NFT holders. Free NFT giveaways are often used as a lure in these scams, enticing users with the promise of free NFTs to trick them into engaging with fraudulent offers. They promise a free NFT in return for spreading their message and signing up for their website.

However, once you link your crypto wallet to receive the NFT prize, scammers record your details and then steal your NFT once they have gained access to your account.

Avoiding this scam can be tricky, but typically, we advise examining the account’s social media page for verification or ensuring the link sent matches the NFT company’s URL.

Social media impersonation

Used as a way to scam others through NFT giveaways or airdrops, impersonating another NFT owner on social media has been a growing trend lately.

Using similar sophisticated details as they would on a fake BFT website, cybercriminals create an online profile, copying the details of a true NFT holder to convince others of their credibility, and then sell them counterfeit NFT collectables.

Check the blue verification tick next to a seller’s profile to verify their identity. Perhaps even direct message them to verify their authenticity. Be cautious of unsolicited messages from accounts claiming to be NFT owners, especially if they request personal information or urge you to take immediate action. Scammers will eventually trip over their own lies.

Impersonating well-known brands

Hopefully, most of us will recognise this quickly as something too good to be true. Social media accounts of legitimate organisations, such as Binance, are copied to obtain access to your personal details, specifically your wallet credentials. The fake business social media account will often have a URL to a phoney website, too. The URL is a slight variant of the valid business web page.

Again, check for the blue verification badge; if it is not there, definitely question the validity of the social media account and report it if it appears to be fake. To avoid brand impersonation scams, constantly interact only with legitimate platforms and use reputable NFT marketplaces that verify authenticity and offer secure transactions.

Impersonating customer support

Hackers will use the NFT owners’ questions against them by impersonating customer support pages on apps like Discord, Twitter or Telegram.

This NFT scam involves creating fake servers to connect to and then requesting personal details, allowing the fake customer support to ‘resolve’ the issue. Yet, in practice, they are gaining uninterrupted access to your crypto wallet.

To avoid this customer support scam, only access the Telegram or Discord server that was created by the NFT creator’s official website or social media account.

Fake NFT projects (rug pull scams)

Scammers often create fake NFT projects to lure early investors, a tactic commonly seen in rug pull scams. In these cases, scammers create what appears to be a legitimate NFT project to attract early investors. Still, the NFTs ultimately prove to be non-resellable, effectively destroying any future value.

The NFT owner then realises they paid an extremely high amount of money for an asset that won’t appreciate as they had believed it would. These are examples of fraudulent schemes in the NFT market.

Use blockchain explorers and rug pull detection tools to identify these kinds of NFT scams.

Counterfeit or plagiarised NFTs

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NFT buyers should note that minting digital files does not create a new piece of intellectual property or grant ownership to the minter, two key characteristics of NFTs. Counterfeit or plagiarised NFTs constitute a significant issue in the market, as scammers frequently create fake NFTs that misrepresent authenticity and ownership.

Scammers use minting to lure people into believing they are buying a unique NFT. Scammers plagiarise other NFT owners’ work and then create an account on a trading platform and auction it off to the highest bidder. Often, these counterfeit NFTs are made from stolen artwork, and selling counterfeit NFTs is a common scam in the NFT marketplace.

Sadly, the asset that is purchased loses its value once the buyer realises it’s a counterfeit NFT, and buyers may end up with worthless NFTs after purchasing counterfeit assets.

Confirm the seller’s credibility by checking the blue verification tick next to the seller’s Discord or social media profile.

Bidding scams

NFT bidding scams occur when an NFT is resold for a higher price. Scammers often target valuable NFTs in the secondary market, creating fake auctions or manipulating bids to deceive buyers into purchasing or bidding on rare and high-value digital assets. Once interested buyers place their highest bid, they usually switch to a lesser-value cryptocurrency. For example, instead of receiving 10 ETH, they could receive 10 MATIC instead. Bidding scams primarily occur when NFT holders attempt to resell their NFTs, mainly in the secondary market.

Always cross-check the currency used during any transaction and never accept bids lower than you initially intended.

Investor scams

Investor scams occur whenever money is transacted — and the situation can be worse when dealing with cryptocurrency.

Scammers create projects that seem like a worthy investment, then entirely disappear with the funds they collected from investors when they paid (even if only partially paid, such as a deposit). Recently, an NFT developer, “Evil Ape,” was rarely heard of again.

It is crucial to take steps to protect investors from NFT scams by verifying the legitimacy of projects and reporting any suspicious activities to the appropriate authorities.

Find contact information for the NFT creator you want to purchase so you can verify them before transferring money.

Pump and dump scams

A pump-and-dump scheme is a common scam in the NFT market. Like securities fraud, experienced NFT scammers employ pump-and-dump schemes to inflate an NFT’s price artificially. These dump schemes are executed by making multiple bids within a short period to make it appear that this particular NFT is popular, capitalising on people’s FOMO (Fear of Missing Out). Scammers artificially inflate prices through social media hype and coordinated bidding to create the illusion of high demand. Once it gains traction and the selling price exceeds the initial valuation, the scammer cashes out and sells to the highest bidder. Pump-and-dump scams are sadly on the rise in the NFT and crypto worlds.

Pump-and-dump scams are difficult to detect. We suggest reviewing the transaction history of the desired NFT. Several transactions centred around a single date could indicate a pump-and-dump scam. Such schemes create a false sense of value and often leave buyers with worthless assets.

Scammers sell their NFTs at inflated prices before the value crashes, leaving others with losses.

How to avoid NFT scams

1. Never click on suspicious attachments or links

Never, ever click on links or attachments related to your NFTs if you do not know or are unsure who it is from. Cybercriminals frequently use phishing emails to trick the public into disclosing their wallet credentials.

2. Create strong passwords

Creating unique, strong passwords for your cryptocurrency wallet and other NFT accounts would be ideal. It would be best if you always considered ‘leetifying’ your passwords.

To leetify, a text replaces standard alphabetical letters with unique numbers or symbols. Leetified passwords are more challenging to guess or crack. Leetifying can help protect you from NFT scams that will attempt to steal digital assets from weak passwords.

For added security, consider storing your NFTs and private keys in a hardware wallet, which keeps your assets offline and safe from cyber attacks.

3. Enable two-factor authentication

Activating two-factor authentication (2FA) on all your NFT accounts will ensure scammers can’t access your collectables. Apps like Google Authenticator or using biometric data on your smartphone, like fingerprint scanning and facial recognition, help make it impossible to replicate your identity.

4. Never share your recovery or seed phrase

Just like your regular passwords, people should never share their seed or recovery phrases with anyone. Doing so will compromise the NFTs, cryptocurrencies, and any other type of crypto asset stored in your wallet.

5. Always cross-check the NFT’s price

Before purchasing NFTs, always check the price on reputable marketplaces and ensure you are using a legitimate platform such as Mintable. If the price appears much lower than what’s listed on a legitimate trading site, then immediately question its actual value.

6. Verify NFT seller accounts

When purchasing an NFT, always verify the NFT seller’s account on trusted NFT platforms before you buy or sell NFTs. Browse through their Discord and social media profiles, and verify their identity using the blue checkmark.

Now that you know the trending NFT scams on the internet, be sure to save this guide when you begin to trade, buy or sell an NFT and beware of the potential signs of NFT fraud. In a world of emerging online cybersecurity threats, there’s no better feeling than learning how to help protect yourself and avoid being a victim of NFT fraud. Always use secure and reputable platforms when selling NFTs to avoid scams and protect your assets.

Remember, if it sounds too good to be true, it is.