Non-fungible tokens (NFTs) have become increasingly popular, with many people looking to purchase tokens as a form of investment.
Various NFT platforms emerged, some create great NFT collections that gain a lot of following. Some individual NFT creators generate their own NFT art.
However, there is an unfortunate side effect that comes with the popularity of these digital collectibles: fraudulent activity in the form of NFT scams.
These scams occur when someone impersonates a legitimate company offering an NFT for sale and attempts to steal money or other forms of value from potential buyers.
There are several ways how NFT scams work, ranging from fraudsters posing as legitimate NFT marketplaces to phishing emails.
In addition, in the NFT space some scammers will promise rewards for purchasing their token, but offer no real value in return. It’s important for potential investors to be aware of how common NFT scams work in order to protect their investments and avoid falling victim to these dishonest schemes.
The Most Common Types of NFT Scams
The NFT scams listed below are most common NFT scams. NFT scammers mastered these types of NFT scams and there is a high chance that you will encounter them one day too.
Rug Pulls
Scammers lure buyers in by promoting fake NFT items or collectibles and promising them that they will make money.
Some scammers promote NFT giveaways offering free NFT, this way promoting their NFT scams.
The scammers hype the asset on social media, but after the purchase all promotions and all unfulfilled promises disappear.
As a result, the value drops dramatically. Scammers also remove the ability to sell these NFTs. At the end scammed investors are left with a useless NFT which has no value. This is by far the most popular NFT scam.
Pump and Dump
Network of people buy huge amounts of NFTs from same collection, eventually holding huge amount of it, they rise the floor price. Then they start promoting the NFT collection increasing it’s demand and giving high hopes for naive investors. At the right moment group of scammers start to dump the price.
Eventually naive investors get the illusion that it’s a great opportunity to buy in and start buying the NFTs which prices are more than inflated. At that point the network of scammers sell all of their NFTs , dump the prices and exit with money in their pockets. Meanwhile investors are left with overpriced or in many cases worthless NFT.
Worth to mention that some of these pump and dumps happen with NFTs , who have no real value and are created by the group of scammers with the sole purpose of scamming others.
Pump and dump in NFT world is usually the optimal NFT fraud that NFT creator tries to pull of if his project is not generating him enough sales.
Phishing
Phishing is an old scam, but it’s still popular now it arrived in NFT sphere. Normally, NFT phishing scams involve fake ads, emails, and pop-ups that redirect people to fake impersonating websites.
The fake website then requests the user’s private wallet key to access their crypto wallet. Once scammers have access to this private information, they can use up any NFT assets or cryptocurrencies in the crypto wallet.
In some cases fake NFT giveaways might be used as a tool to get the victim hooked.
Phishing scams usually are the ones that inflicts the most financial damage.
CHECK OUT ALL TYPES OF NFT SCAMS
How To Protect Yourself From Being Scammed?
Do your research: Whenever you’re thinking about making an online NFT purchase, take the time to research the seller or website. Check for reviews and look for any red flags that might indicate a scam.
- Do not click on any suspicious links and always double check the URL of the website before making the purchase.
- Use Two-Factor authentication for all your accounts.
- Check reviews of NFT project that you plan to invest in.
- Make sure you are not buying counterfeit NFTs.
- Consider using a cold wallet such as Trezor wallet.
- Do not interact with suspicious messages and pop-ups.
- Look in to NFT’s history, make sure that price had not recently pumped, check how much of the NFT collection holders are unique addresses.
- Use reputable marketplaces like OpenSea.
Conclusion
There are a few key things to keep in mind when it comes to NFT scams. First, be sure to only buy NFTs from reputable sources. There are many NFT marketplaces out there, but not all of them are created equal.
Always double check the URL of your website, before making any transaction.
Be sure to keep your NFTs stored in a secure place.
Finally, be sure to stay informed about the latest NFT scams. There are always new scams being created, so it’s important to stay up-to-date on the latest information. By following these simple tips, you will protect yourself and avoid NFT scams.
