The NFT space is often marketed as the hub for fast money. Do you want to bag generational wealth? NFTs have got your back. While that might be true, it isn’t as easy. And, it indeed isn’t without any risks. In fact, it is extremely risky and you can lose all your money in a split second. Many NFT investors have lost all their assets due to NFT scams. The more money, the higher the risk of losing it. So, in order to save you the trouble, and mental breakdowns, here are the most common NFT scams. And, what you should do to avoid them.
What Are The Most Common NFT Scams?
The NFT space is infested with scams. Thieves know what they’re doing. Are they going to steal your money in one way only? Nah, it’d be too easy for everyone to avoid. So, they adopt various ways. That way you have to keep dodging them left and right hoping you’d slip while you’re at it.
Phishing: Most Common NFT Scam
This NFT scam is very basic. Unfortunately, many fall victim to it. Scammers send fishy emails, DMs, notifications, etc. Users think it’s a legitimate source and connect their wallets. A few seconds later, they lost everything in their wallet from NFTs to cryptocurrency. Two clicks and all their assets are gone.
NFT Phishing Attacks in 2023
In January 2023, RTFKT COO lost over $170,000 in a phishing attack. Moreover, at the beginning of 2023, on-chain detective ZachXBT uncovered a phishing scam. Later in February, the FBI seized the stolen crypto, BAYC 9658, and Doodle 3114.
How Not To Fall Victim To Phishing NFT Scams?
We really want to avoid losing money. So, how can we avoid phishing attacks? Honestly, it’s easier to protect yourself from phishing nowadays. You just have to be aware of these red flags:
- Links through DMs. If accounts you’ve never heard of send you links via DMs, they’re probably scammy.
- Too-good-to-be true offer. If the link promises you heaven, it’ll probably put you through hell and stall all your money.
- Requesting your seed phrase. Your wallet will never ask you to share your seed phrase unless you’re logging in or reinstalling it.
Also, there are now extensions you can download, like Wallet Guard, that notifies you whenever you’re connecting your wallet to a scammy website. And, to bring you even more security, here’s how you can secure your wallet from phishing scams. Plus, Metamask recently updated its wallet and added a phishing detection feature.
Rug Pulls: No Solid Ground
A rug pull is when the project’s team completely abandons the project and goes AWOL after raising a lot of money. Basically, the team hypes up the project and builds a community with zero intention of doing anything long-term.
The community, unaware, chips in and either buy the NFTs or coins. Then, with little to no warning, the team completely disappears off the face of the earth. And, rug pulls suck.
Most Expensive Rug Pull
The most expensive and biggest rug pull that shook NFT investors was back in 2022. An NFT project, Frosties, launched on the Ethereum blockchain and immediately sold out. Then, Frosties’ website, social media, and Discord were deactivated. And just like that, investors lost 1.3 MILLION dollars. The project operators were later arrested and charged by US law enforcement.
How To Avoid Rug Pulls?
Considering rug pulls are one of the most common NFT scams, you should be extra careful. But, how can you know the project’s team is legit? Just because someone says they’re telling the truth, doesn’t mean they are. So, how can you tell?
You can’t, ever, know for sure that the project you’re investing in is 100% safe. Risk is inevitable. However, to limit the risk, look for the below green flags:
- Undoxxed team. If founders build their projects using their real-life identities, they’re less likely to disappear. It makes it harder to vanish. However, if you know nothing about the creators besides their Twitter handle, you might want to reconsider your investment.
- Clear project plan. Before investing in a project, understand what it plans on doing long-term. If their roadmap is vague, consider it as a red flag. Also, if it seems too good to be true, it probably is.
- Established project. If a project has been around for a while, it’s a green flag. And, if it started actually doing things it said it would do, that could be your sign to invest in peace.
And, of course, always do your research before investing in anything. Check the team, the plan, and the community. Don’t recklessly spend your money then expect not to lose it.
Fake NFT Airdrops: If It’s Free, It Might Be A Scam
NFT airdrops are investors’ favorite activity. I mean, who hates free stuff? But, there’s a fine line between legit airdrops and fake ones. Holding NFT airdrops is a well-established marketing strategy that projects use to promote themselves, hype upcoming drops, and reward their communities.
And, sometimes, they do be insane. Just like the airdrop that Blur held where it gave away $BLUR tokens to its community. Some NFT traders got millions of dollars worth of $BLUR tokens.
But, How Do We Know An Airdrop Is Legit?
Of course, we won’t boycott airdrops in fear of NFT scams. That’d be stupid. We will join airdrops but we will do so with caution. If you hear about an airdrop from a certain project, check the project’s socials and website. And, if the airdrop announcement is on there, proceed. If not, walk away.
For example, news started circulating lately that Metamask is hosting a $MASK coin airdrop. Twitter was filled with wallet-drainer links. Metamask then announced that it has no such thing planned. Again, always do your own research.
Counterfeit NFTs: Buying A Fake NFT
NFTs are so hyped up because they’re “unique”, and “non-fungible”. So, it kinda defies the purpose if you’re buying a fake. At this point, just right-click and save the JPEG. Well, of course, no one buys fake NFTs on purpose.
It’s just another smart NFT scam to steal people’s money. It’s smart because if you don’t pay attention, you won’t even notice it’s fake. You can buy fake NFTs on OpenSea exactly like you’d buy legit ones. Don’t worry though, we’ve got a full guide on how to spot fake NFTs.
Bidding NFT Scams: The Cheap Last-Minute Switch
This NFT scam is probably the nastiest. And, it regularly happens. Bidding regularly happens on secondary marketplaces when you want to sell your NFT. Basically, scammers switch the cryptocurrency they’re bidding with.
So, let’s say someone bids 25 ETH for your NFT. Per the current ETH rate, you’d be expecting $44.8K. But, the person ends up switching it last minute to SOL. You’d end up accepting an offer of $513 instead of 44 THOUSAND.
How Can You Avoid Bidding Scams?
Of course, pay attention to the bids you’re accepting. Double, or even triple-check what the offer is. Check the amount and the cryptocurrency. Also, make sure you don’t accidentally accept bids that are lower than the floor price. The bottom line here is, be extremely careful.
Catfishing and Fake Marketplaces: It’s Not What It Looks Like
You probably know what catfishing is from online dating. Well, it’s kinda the same concept here. People pretend to be what they’re not. You see fake accounts pretending to be blue chips or famous influencers. They’d share malicious wallet-drainer links claiming to be hosting airdrops or free mints.
You would even see fake marketplace websites. A fake OpenSea website, that looked so similar to the real one, stole over 250 NFTs from 17 users. The key thing here, just like the ones above, is to be aware of what you’re joining. Always check what you’re interacting with in this space.
Less Common NFT Scams
We focused on the most common NFT scams above. But, that is not all. There are still other NFT scams. We’re infested waters, peeps.
- Pump and dump schemes: This is more of a market manipulation tactic. A group of people buys cryptocurrencies or NFTs in bulk causing the value to pump. When their value increases, these scammers dump the bulk they hold causing the price to completely crash.
- Customer Support impersonation: Some scammers will pose as customer support for certain NFT projects. Then, they’ll tell you to click on a certain URL to fix your problem. It ends up being a wallet drainer and you lose all your money.
- Smart Contracts Phishing: This is a type of phishing done through smart contracts. Scammers write a smart contract that looks like a legitimate contract but includes a fraudulent feature. This feature transfers all the user’s NFTs to the scammer once they sign the contract. If one doesn’t know how to read a smart contract, one can easily fall victim to this type of NFT scam. I got you, though. Here’s a full guide to understanding smart contracts.
How To Avoid NFT Scams
Now that you know all these types of NFT scams, let’s recap on how to avoid them. Take notes so you can save yourself from losing all your hard-earned money.
- Do your research. Always research before investing in any project, buying any cryptocurrency or NFT, or joining any airdrop.
- Don’t share your private key or seed phrase with anyone. If a website asks for these details, it’s most likely fraudulent.
- Don’t click on suspicious links. Always make sure the links you’re clicking on are legit by double-checking the source.
- Watch the bids. Triple-check all the bids and offers before you accept them.
- Make sure you’re using the right marketplaces. There are many fake websites out there, make sure you’re using the legit ones.
- Download web extensions. These extensions, like Wallet Guard, will notify you when you connect to a fishy website.
I hope I didn’t freak you out much. But, the good thing is you can avoid what you know. So, use this article as a protection blanket from NFT scams. I can’t assure you that you won’t ever get scammed from now on. What I can tell you is that you’re now aware enough to lower the risks of you losing your money. Anyway, let me leave you on a good note. Here’s a meme trivia to lighten up your mood!