Where there is massive financial opportunity, there will be malicious actors, and scams have recently afflicted the NFT industry. Unfortunately, the sophistication and effort of recent NFT scams have been enough to bring down both industry veterans and newcomers. The digital trading era is taking many forms, from the dawn of cryptocurrencies to the formation of NFTs. While the status of NFT scams gained worldwide acceptance in 2022, with many people investing, this has also attracted the development of new ways to steal money.
In this article, we’ll look at some recent NFT scams in 2023 and how to avoid them.
NFT Scams
A Non-fungible token (NFT) scam is a type of deceit in which investors are duped into investing in what appears to be a legitimate investment opportunity involving digital assets such as art, music, and videos.
The NFT scam always results in investors losing money and/or being stuck with worthless assets (NFTs) that they will almost certainly never be able to sell for the price they paid.
How do NFT Scams work?
The majority of NFT fraudsters want to gain access to your NFT account. They accomplish this by using a variety of phishing scams to obtain your private wallet key. Once these scammers gain access to your account, they will quickly drain it before you even realize what is going on.
If scammers are unable to obtain NFT holders’ login information, they will create a false or worthless NFT project and prey on people’s fear of missing out and the lure of a quick buck to entice them to invest. The fraudsters vanish with the funds once the NFT gains traction and investments pour in.
Top 7 Prevalent NFT Scams in 2023
Now that we know how NFT scams work, let’s peel apart seven of the most common ones.
1. Rug pull
Rug pulls are the most common in the crypto space. The owner or company creates a buzz around the NFTs, which leads to increased prices. It is the method by which investors are persuaded of the value of NFTs and tend to purchase them. Soon after, the promoters stopped backing up the assets, leaving investors to bear the losses.
How Can You Avoid a Rug Pull NFT Scam?
- Before investing in a project, conduct extensive research.
- Check to see if the marketplace is reliable and offers a wide range of opportunities to buy and sell NFTs.
- Look through the NFTs’ transaction history.
- Learn about the project’s developer to ensure that it originates from a trustworthy source.
- Maintain a record of any complaint filed against the project Before investing in an NFT, make sure you’ve gone through all of these steps.
2. Pump and Dump
The “Pump and Dump” scam is the next most obvious way to drain an investor’s funds. The project developers purchased a large quantity of NFTs in order to create a false demand. This portrays the NFTs as market performers, duping investors into purchasing them. Once the prices have peaked, the scammers sell all of the NFTs, causing a sudden drop in prices and a loss for investors.
How Can You Avoid a Pump and Dump NFT Scam?
- Before purchasing NFTs, evaluate the buyers’ list. More buyers for the asset imply greater liquidity.
- Check out the social media profiles of the cryptos to learn more about them. Enroll in their Discord server and interact with other members of the community. The active participation of members in the Discord channel ensures that the project is live and well.
- Begin with small investments and then assess the risk factors before investing large sums.
- Instead of blindly trusting the word of influencers, conduct field research to determine the potential of the tokens.
3. Phishing Pop-Ups
Phishing links can be found on any social media platform, including Telegram, Discord, and Twitter. These links look more like the company’s URL, and when clicked, they redirect to a page that asks for sensitive information. Assume the user clicks on the link to purchase NFTs without realizing it is a scam; it asks for wallet information to proceed with the purchase. The funds are withdrawn once the user enters the wallet’s seed phrase (i.e., password). Many such phishing link scams are on the rise right now.
How Can You Avoid a Phishing Links NFT Scam?
- Instead of clicking on links or pop-ups, go to the official page to make any NFT purchase.
- If you buy anything through the links, make sure the URL matches the company’s website.
- Passwords for wallets should not be entered anywhere. It is only required when backing up or recovering your wallet.
4. Fake Profiles and Personas
Official project social media pages are duplicated with a similar appearance to the originals. The pages host launches and giveaways, tricking users into purchasing exciting collections. Furthermore, virtual marketing has made it extremely difficult to identify industry influencers. Again, it allows many fake personas to promote NFTs in an appealing manner.
How Can You Avoid a Fake-Profile NFT scams?
- Conduct a Google search on the personalities to ensure that the information provided by the influencers is correct.
- Make a point of not DMing celebrities first. If you receive such messages, consider them a warning to be wary of NFT threats.
5. Counterfeit NFT
Anyone can mint artworks as NFTs in markets that do not require intellectual property (IP) rights for the assets. Scammers can use this to create fake accounts, copy, and mint NFTs of any creator’s work. However, once it is identified as plagiarized content, action will be taken against counterfeit NFT. Even so, the buyer’s investment in those NFTs is permanent.
How Can You Avoid a Counterfeit NFT Scam?
- Perform a general search on the creator’s profile. Check to see if the seller’s account has a blue tick mark. Before making the NFT purchase, go to their Twitter or Instagram account and contact the artist directly.
6. Bidding Scams
It has been customary to change the bid amount to another option. For example, if you set the bid price for the collection to 10 ETH, which is equivalent to $20, 000 to $25, 000, the scammer may bid for $10.
How Can You Avoid a Bidding Scams?
- Always double-check the standard of the cryptocurrency used in bidding because transactions cannot be reversed once completed.
7. Technical Support Scam
Hackers create customer support pages on Telegram and Discord channels and request personal information from users in order to resolve the issue. Scammers steal funds from wallets after gaining control of the user’s details.
How Can You Avoid a Customer Support NFT Scam?
- Never give out personal information to anyone else. Always access the query section through the project’s official page or the NFT Discord server.
Closing Thoughts
The NFT space is riddled with scams, and if you don’t keep your eye on the ball, you could lose all of your digital assets. However, it is unregulated and subject to extreme volatility, making it easy for scammers to target the market. As a result, investors must exercise caution and conduct due diligence to avoid being duped in the crypto world.