NFT scam: Navigating the Wild West of NFTs
The popularity of NFTs (non-fungible tokens), is the hottest new trend in the world of digital art and collectibles. But with the excitement comes the potential for scams and frauds. As the NFT market grows, it’s important to understand how to protect yourself from NFT scams. In this article, we’ll cover best practices for buying and selling NFTs safely, how to recognize and avoid scams, and what to do if you fall victim to an NFT scam.
NFTs are still new and the sector is not fully perfected. While blockchain enthusiasts consider them a thrilling indication that mainstream crypto adoption is on its way, NFTs create some rather lucrative prospects for scammers due to the amount of money exchanging hands in the crypto space.
In an interview, Georgio Constantinou, who develops and discovers crypto projects, said, “As more money flows into the metaverse, so do bad actors hoping to extract value at the expense of everyday crypto users”.
Over the years cryptocurrency scams have been getting more sophisticated, and people have to be extra cautious in the decentralized ecosystem. There are various types of these scams and it is vital to learn how to spot them so you can avoid them.
Some common types of NFT scams include:
- Phishing scams and suspicious pop-ups
To purchase your first NFT, you will need to have a wallet that transacts on the Ethereum blockchain. MetaMask seems to be the most popular Ethereum wallet for NFT collectors. However, there was a phishing scam targeted at MetaMask users, involving a fake advertisement that asked users for their private key or 12 words seed phrases. Note, any form of interaction that asks for your private key is a huge red flag.
There are also malicious pop-ups functioning via Discord, Telegram, and other public forums that give targets a phishing URL that links to a cloned login page of MetaMask and other popular wallets. Once victims input their key phrase all their tokens and NFTs will be moved from their account.
- Fake NFTs Stores
Scammers often clone popular NFT marketplaces, like OpenSea to sell fake NFTs Arts. This looks the same as the original one and deceives inexperienced NFT buyers into spending their money on fake artworks that in reality are worth nothing.
However, there are ways to recognize if you are in a fake NFTs store, firstly, it is important to do your research on the NFT you want to buy.
It is common for fake NFT stores to list items for a ridiculously low price, an ApeGang NFT that is priced 20 ETH on OpenSea’s official website can be listed on a fake website for 1 ETH.
If you’re new to the NFT space or unsure of the actual worth of the NFT, you can be led into thinking you’re getting a good deal, when, in fact, you’ll be spending a few hundred dollars on a fake artwork. Just like everything in cybercriminal activities, anything that seems too good to be true probably is.
It is also important to know that fake NFT stores will host unverified buyers. On official stores, larger sellers will have a blue verification tick next to their usernames, like the ones you’d see on social media.
So, if you’re looking into buying a more expensive NFT, check that the seller is verified first. On top of this, you can check the unique properties of the NFT you’re interested in. Fake NFTs won’t have any properties listed, while real NFTs will.
- Customer Support Impersonation
Crypto scammers sometimes fake the customer support page of a legitimate NFT project to get sensitive information from unknowing NFT owners. This is popular on Discord. If you connect to this fake customer page instead of the real one, scammers can get enough information to steal all the NFTs in your wallet, pretending to fix whatever problem you may be having.
If you want to connect to the Discord server of a particular NFT project it is safer to go through the official website of the project instead of searching for the server on Google or Discord. You should also check how many followers the server as if you can’t access it this way, as it’s unlikely a fake server will have thousands of followers.
- Outbidding scams
Bidding scams are popular in the secondary market. They occur when someone has already purchased an NFT and is looking to resell it most times for a higher price. Bidders may look to change the cryptocurrency used after you list your NFT sales. This is a red flag! Naturally, 5ETH won’t be the same as 5 BTC.
Protecting Yourself from NFT Scams
NFTs are an exciting new frontier for digital art and collectibles, but the potential for scams and fraud is also a concern. Here are some best practices for buying and selling NFTs safely:
- Use reputable marketplaces: Use established and reputable marketplaces or platforms to buy and sell NFTs. These platforms typically have to vet processes to ensure the authenticity of the NFTs being sold.
- Verify authenticity: Verify the authenticity of an NFT before buying or selling it. Look for proof of ownership, such as transaction records on the blockchain, and check the NFT metadata to confirm its details.
- Beware of unsolicited offers: Be cautious of unsolicited offers to buy or sell NFTs, especially from unknown individuals or unverified sources. Scammers often use these tactics to defraud unsuspecting buyers or sellers.
- Protect your private keys: Protect your private keys or seed phrases and never share them with anyone. Keep them in a secure and encrypted location, such as a hardware wallet.
- Research thoroughly: Do your research thoroughly before buying or selling an NFT. Look for reviews, ratings, and feedback from other buyers and sellers, and verify the identity and credentials of the other party.
Here are some tools and resources for verifying NFT authenticity and avoiding scams:
- OpenSea: OpenSea is a popular NFT marketplace that has a built-in verification process to ensure the authenticity of NFTs being sold.
- Nifty Gateway: Nifty Gateway is another NFT marketplace that has a verification process for NFT authenticity.
- Etherscan: Etherscan is a blockchain explorer that can be used to verify NFT transaction records and other blockchain data.
- Google Reverse Image Search: Use Google Reverse Image Search to check if an NFT is being offered for sale elsewhere on the internet, which may indicate that it is not authentic.
Here are some common red flags to watch out for when dealing with NFTs:
- Unrealistic pricing: Be wary of NFTs being offered for sale at unrealistic or too-good-to-be-true prices.
- Lack of transparency: Be cautious of sellers who are not transparent about the details and history of the NFT being sold.
- Pressure tactics: Be wary of sellers who use high-pressure tactics to rush you into buying or selling an NFT.
By following these best practices, using these tools and resources, and watching out for common red flags, you can protect yourself from NFT scams and frauds.
Reporting NFT Scams
If you have fallen victim to an NFT scam or if you have come across an NFT scam, it is important to report it to the appropriate authorities and platforms. Here are some steps to take:
Report to the platform: If the scam occurred on an NFT marketplace or platform, report it to the platform’s support team or customer service. Provide as much information as possible, such as the NFT name, seller or buyer information, transaction records, and any other relevant details.
Report to law enforcement: If you have been defrauded in an NFT scam, report it to your local law enforcement agency or to the FBI’s Internet Crime Complaint Center (IC3). Provide as much information as possible, such as the seller or buyer information, transaction records, and any other relevant details.
Report to regulatory agencies: If you suspect that an NFT scam may be in violation of securities laws or other regulations, report it to the appropriate regulatory agencies, such as the SEC or CFTC.
Seek legal or financial restitution: If you have suffered financial losses as a result of an NFT scam, consider seeking legal or financial restitution. Consult with an attorney who specializes in securities law or fraud, or seek assistance from a consumer protection agency.
Educate others: Share your experience with others and warn them about the risks of NFT scams. By educating others, you can help prevent others from falling victim to similar scams.
Remember that prevention is key to avoiding NFT scams. Be vigilant, do your research, and follow best practices for buying and selling NFTs safely.
In conclusion, the world of NFTs is exciting and full of potential, but it’s important to be aware of the risks of scams and frauds. By following the best practices we’ve outlined in this article, you can protect yourself and your investments from NFT scams.
Remember to do your research, verify authenticity, and report any suspicious activity to the appropriate authorities. With a little bit of caution and vigilance, you can safely navigate the NFT market and enjoy the benefits of this exciting new technology.