3 Legit Ways To Identify NFT Scams – Safety Guide

It’s not just NFTs that are in vogue today; NFT Scams are too.

This is largely due to their ability to allow artists — as well as content creators — to sell their NFT artworks at astronomical prices. The NFT market skyrocketed in 2021, gaining about $22 billion in value, drawing about 280,000 sellers and buyers, with more than 185,000 wallets being created.

Now is the best time to confront the truth. With the growth of the NFT industry, the number of cybercrime incidents has also increased, resulting in shocking stories of NFT scams worth reading.

NFT has changed a lot since its inception. Things are changed now. With the increase in users, new projects are emerging and gaining immense popularity. The economy is booming, and finding trustworthy brands, projects, and influencers is harder than it used to be. Why? Despite their fame, some prominent people and companies have been accused of facilitating NFT scams or engaging in unethical behavior.

A community that once relied on art trade and innovation to show their love for this type of existence, now playing by other rules. These scams may cause you to lose your NFTs altogether – or turn them into nothing overnight. Even worse, you may buy NFTs that disappear before you have the chance to recoup your investment.

One can say with certainty that all of this is clearly the work of a corporate investment group rather than a passionate fan of artists’ work. Thus, we have? A surge in NFT scams perpetrated by fraudsters. 

Most Common NFT Scams

Consider @NFT, for instance – a collaboration between Jason Falovitch and Mark Cuban. Most social media platforms banned them for not labeling sponsored posts properly and worse, for promoting scam projects and fraudulently profiting from them. 

It’s quite apparent that accountability is lacking. Hence, consumers must learn to recognize NFT scams to ensure their safety. Almost all the information you need to protect yourself is provided in this guide.

Let’s start by going over a few of the most common NFT scams.

#1 – Investor Scam

Considering the anonymity associated with cryptocurrencies is one of the reasons NFTs are susceptible to investor scams. Fraudsters take advantage of anonymity to create fake projects that look like promising investments, disappearing with funds after they have been paid.

Hopefully, you all remember the time when an anonymous creator of an emerging NFT project named “Evolved Apes” fled with $2.7 million, equivalent to 798 Ether after investors poured millions of dollars into the venture. 

Evolved Apes NFT artwork winners who’d been promised prizes on the social media pages of the project did not receive their prizes either. Ultimately, the rug pull scam was nothing more than a massive marketing scheme.

Even though most people prefer to invest in emerging projects through NFTs, it’s crucial to be mindful of these kinds of potential NFT scams if you happen to be purchasing anything in the cryptocurrency market.

#2 – NFT Giveaway Scam

NFT Giveaway Scams usually referred to as airdrop scams, involve scammers offering you a free NFT in exchange for promoting their NFT. Fake NFT profiles on social networks — including Discord servers — are often used to host fake giveaways and fool players into believing they have hit a jackpot. NFT scams are also common on Twitter.

A typical scenario goes like this. You will receive a link from scammers to input your wallet details. Their scam involves copying your account information and gaining access to your NFT collections.

#3 – Bidding Scam

NFT investors can be scammed when they re-sell their inherited or bought NFTs on secondary markets. Several bidders may replace your favored cryptocurrency with a cryptocurrency of lower value after your NFTs are listed for sale. 

Let’s say you receive a bid of 20 Ether from a fraudster requesting your NFT artwork. You’ll be expecting to receive around $1,192.35 (based on the current exchange rate at the time of writing). Ingenious scammers can, however, substitute 50 Dogecoins for the crypto, a value of less than $2.

Those who don’t double-check their currency before accepting a sale run the risk of losing money. So make sure you always double-check it. 

#4 – Phishing

NFTs can only be purchased through a crypto wallet, which you need to sign up for first. Customers are typically targeted by NFT phishing scams via fake advertisements – such as those on Discord and Telegram – in which they are asked for their wallet credentials and a 12-word security phrase. It is also possible for scammers to disguise themselves as MetaMask by sending you a fake alert email specifying that your wallet has been suspended due to security concerns, asking you to verify your account by clicking a link. 

You can lose your digital wallet by answering a phishing email with your personal information.

Sadly, NFT phishing scams have become increasingly common. For instance, in February 2022, fraudsters succeeded in stealing around $1.7 million through phishing attacks targeting OpenSea — a platform that is popular among NFT users. 

Scammers copied OpenSea’s email and sent misleading links to NFT owners in response to an email asking them to update their contract details.

#5 – Pump-and-Dump Scam

The pump-and-dump scheme involves fraudsters inflating NFT prices by spreading misinformation and misrepresenting them. Whenever the price reaches a certain level, scammers “dump” the NFT and vanish, leaving investors with nothing but a pile of worthless scrap.

It’s not just the traditional financial markets that are vulnerable to these scams; the NFT industry is also becoming more susceptible to them.

NFTs are usually hyped up with sponsored celebrities and social media. A lot of times, they pump money into NFTs, which pushes up the price and makes it hard for investors not to notice.

#6 – Rug Pull Scam

Rug Pull scams involve a group of scammers making positive claims about their project, collecting funds, and then disappearing. After that group of scammers runs off with the money, collectors are left with a worthless asset. There are no obligations they fulfil, such as making charitable contributions or organizing events and displaying new works of art. Rather, they take what they want and disappear.

There is no law against rug pulling in most cases. The fact is, rug pulling isn’t illegal 99% of the time. Does this make them unethical? Yes, certainly. However, nothing can really be done when someone agrees to donate money but then keeps it.

Ways To Identify NFT Scam Projects

When it comes to the NFT industry, scammers are usually cunning and creative at the same time. There are 2 main things that need to steal anything in the NFT space. 

1. An in-depth understanding of the technology behind blockchains. 
2. Smart contracts. 
3. Having decent marketing skills is also a requirement. 

Below you will find a list of red flags that can help you detect NFT scams.

You should start by finding out who the project team is behind the NFT project you are interested in.

Does that team have a good reputation in the NFT community? 

What is their level of involvement in the community?

Do the founders’ accounts date back a long time? A project can be characterized by these things. 

Do they have a long history of creating? It’s a red flag if the team’s info isn’t remotely verifiable.

Once you have that information, check how many followers they have on different social media platforms.

A social media account can be bolstered by buying followers and engagement. Social platforms such as Instagram, Discord, and Twitter fall under this category. Nevertheless, you should concentrate on Twitter and Discord, since these are the two most widely used platforms for verifying the legitimacy of their NFTs. 

If a project’s Twitter account was launched just over a month ago and they have a six-figure following, that’s a red flag.

Look at their prices next.

ETH is generally used to price NFTs. Some people may not find 0.1 ETH much of a deal. However, for those new to NFTs, $113 is rather steep. “Even for a rookie, that is a considerable sum when it comes to JPEGs,” says Steve Mitobe (CEO and Founder of WestCoastNFT).

According to him, it is also important to consider: Does the project you’re considering have a reasonable value, what will be the developer’s profit, and where will it be invested?

If you’re seeking the best mint price, pay attention to notable projects that were a success, such as the Doodles project, the Bored Ape Yacht Club (BAYC), and the Cool Cats project.

What can you do to protect yourself from potential NFT scams?

Doing extensive research ahead of time is your best defense against potential NFT scams or NFT fraud. Can you trust the marketplace with which you are dealing? Is it possible to view the transaction history of the buyer or seller? To find out if there have been previous complaints about the creator’s transactions, read reviews and look at the creators’ engagement level. Make sure the developers behind a project are genuine before investing.

Final Words

It is a scam-filled world in the NFT realm, and if you don’t keep an eye on it, you could lose all your digital assets. To ensure the safety of your NFT, encrypt your passwords and set up 2-step verification. Moreover, do not share your seed phrase with anyone (or tap on shady links) asking for your private wallet key. 

Secure your NFT traffic by using a VPN. Due to its top-of-the-line encryption features, we strongly suggest ExpressVPN.

Are there any NFT marketplaces that you use? What are your methods of avoiding scams on those marketplaces? How many of the cons we mention in this article have you personally experienced? We would love to hear your thoughts in the comments below. Stay safe!