NFT scams have kept a lot of people from participating in the space. At the beginning of 2022, NFT sales crossed a total of $4 billion, and what this means is that more and more people are trading NFTs and investing in NFTs.
With all of this money changing hands, it’s normal to see bad players step into the game with NFT scams. Also, most early adopters are tech-savvy, hence, NFT scams tend to be sophisticated.
Whether you’re just starting out have been in this space for a while, it’s important that you know these NFT scams and how to avoid falling prey to scammers.
Popular NFT scams and how to avoid them
1. Discord DMs phishing
Discord, being one of the most important platforms for NFT projects, is the place you’re most likely to encounter the most NFT scammers.
These NFT scammers find you and begin to DM you consistently or randomly. They often like to pretend to be a popular influencer, brand, or even a celebrity.
Most of the DMs you receive from NFT scammers would be fake announcements from NFT projects, and some DMs contain a link. Be sure never to click any link you see on these messages. Other DMs would be from your supposed friend asking for some cash.
Don’t believe the fake NFT project announcements you receive in your DMs on Discord. Before you believe anything, always find out its legitimacy and full details on the group.
Discord is also where you find fake airdrops and giveaways intended to scam you. I’ll discuss this later in this post.
2. Fake Twitter Personas
NFT influencers on Twitter sway the purchasing decisions of investors in NFT projects. For this reason, NFT scammers now impersonate the Twitter profiles of NFT influencers and brands to defraud unsuspecting people.
The scammers would rename a Twitter profile to something close to the handle of an NFT influencer or brand. Not only that, but they also copy the bios, profile picture, and header of the real account verbatim.
Using the fake Twitter accounts, NFT scammers then DM their targets start a conversation, and try to promote some scam projects or promote a scheme. Sometimes, the fake profile goes to the extent of asking the user for help and opinions on matters.
To spot fake Twitter accounts, check their verification status. No fake Twitter account would be verified. However, this method won’t work if the real profile is also not verified.
In this case, check the quality of their tweets. Being a supposed NFT influencer or brand, their account is probably fake if they retweet much more than they post their content. Similarly, if they have only a few followers, which is not expected of popular NFT influencers and brands.
Fake Twitter personas and Discord DMs are two of the tools NFT scammers use the most.
3. Pump and dump NFT schemes
A pump and dump NFT scheme refers to a situation when someone or a group of individuals manipulate the market by purchasing huge amounts of an NFT, thus driving up the demand for the asset. When the value increases, the scammers dump their held assets smiling to the bank and leaving investors with worthless assets.
Knowing about pump and dump schemes, you must check the transaction history for a project before you invest in it. If the project only has a handful of people driving the sales up to large amounts, it’s probably a pump and dump NFT project.
4. Giveaways and Airdrops
The easiest way to avoid most NFT scams is to know that if something is too good to be true, it probably isn’t true. This quote applies so much to NFTs and cryptos in general. You will always encounter people looking to give you free money. But what’s in for them?
Many fake airdrops are successful because the perpetrators usually advertize them from hacked Twitter accounts or YouTube channels of influential individuals or brands (see number 2).
Some fraudsters don’t even bother to hack these accounts, they create theirs for the sole purpose of scamming unsuspecting people.
In the embedded tweets below, you can see the YouTube channel Live News post about Elon Musk & SpaceX giving away free bitcoin. Given, this was a crypto scam, but it works the same way with NFT scams.
To avoid these scams, do not share your wallet address with strangers on the internet or anywhere. You should only give someone when you are about to receive funds from a transaction.
Basically, no airdrop is real. Anyone promising to do a giveaway is almost sure to have something malicious up their sleeves.
5. Fake mints
A tactic for knowing what NFTs to buy is by following the wallet activities of huge influencers in the space. If you do this or plan to do it, you must know that it’s not entirely safe from scammers.
Knowing that collectors can follow people’s wallet activities, malicious players have realized that they can send their NFTs to the wallets of these influencers to make it seem like the NFTs were minted by the influencers.
Fraudulent developers call the mint function and point it to the wallet address of the influencer. To an onlooker, they would believe that the influencer minted the NFT themself.
To confirm that a transaction you see on someone’s wallet activities is legitimate, you should confirm the actual address of the influencer and check if it matches the From address shown on the transaction overview.
6. Rug pulls
NFTs have a ton of practical uses, such as ensuring product authenticity, transferring ownerships, storing records, and much more. However, the technology is primarily marketed as a get-rich-quick scheme.
For this reason, people dump fake and worthless collections in NFT marketplaces and advertize them as the next big thing.
They post these NFTs with a fake roadmap, promising that it’s part of an upcoming bigger project, and when people buy the NFTs, the creators disappear with the funds realized and leave the holders with worthless NFTs.
This scam is called a rug pull. A recent one involved a project called Evolved Apes, the creator disappeared with $2.7 million. You can read more about it on Yahoo! Finance.
Rugpulls are among the easiest scams to fall prey to – no matter how experienced you are with NFTs. But how do you tell between a rug pull and a legitimate project?
Simply put, if the only use of an NFT is that it unlocks perks sometime in the future, you shouldn’t waste your money on the project. So long as the perks the creators promised are to come, later on, they know that no one can hold them liable when they run away.
Also, the creators of these fake projects usually do not spend much time or resources setting them up. So, their websites almost always look trashy and look like it was set up in a hurry. When you identify such projects, steer clear of them.
7. Counterfeit NFTs
Counterfeit NFTs are a huge problem recently. People buy items of huge projects without thinking twice, and scammers found this as an opportunity to create counterfeits of these projects to trick collectors.
This NFT scam is incredibly prevalent with CryptoArt. Most of these counterfeit NFTs are sold from the creators’ websites and others in marketplaces. Buying a counterfeit NFT is like buying a counterfeit anything – the NFT has absolutely zero value.
Before you buy an NFT, you must confirm that the contract address is the genuine one. Also, check the seller’s history to see if their sale volumes are as much as expected of a popular project. If the NFT is a one of one edition, it should have one sale only.
Furthermore, check other NFT marketplaces to see if this item is listed there also.
Another factor to verify the authenticity of a project is the price of the NFTs. Think twice before purchasing popular NFTs sold for low prices.
Thankfully, marketplaces verify NFTs with a blue check if they are genuine. So, look out for this before buying an NFT.
8. Beware of malicous NFTs
You may do your due diligence and everything right before purchasing an NFT and still end up getting scammed. Some NFTs are designed to hack your MetaMask and steal NFTs and crypto tokens from your wallet.
Sometimes, hackers send the malicous NFTs to your account, and the moment you move them, your cryptos and NFTs are gone. This NFT scam works similar to a Trojan virus in the Windows operating system.
The Twitter thread below is an example of this NFT scam in action.
Are NFTs scams?
NFTs are not scams.Although there are many NFT scams, the technology itself is not a scam. An NFT (non-fungible token) is a unit of dat that uses technology to allow digital content to be logged, authenticated, and on the blockchain.
Are NFTs a pyramid scheme?
NFT is not a pyramid scheme. But some collectors and creators could use projects as pyramid schemes. Treat NFTs like security tokens that do not have the regulations for such assets.
How do I know if my NFT is real?
To know if your NFT is real, you can simply ask the owner or digital artist who created the NFT. You can also check the NFT metadata and transaction history. Alternatively, use an NFT verification service.
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