The soaring popularity of NFTs offers huge opportunities for investors and, unfortunately, scammers.
The popularity of NFTs, or Non-fungible tokens, has skyrocketed over the past few years, with NFT art pieces now going for millions. But when an industry gets this large, it’s only natural for scammers to try to take advantage of unknowing buyers.
So, what are the most common NFT scams, and how can you steer clear of them?
- Fake NFT Stores
Scammers can replicate popular NFT marketplaces, like OpenSea, in order to create fake NFT stores. These sites often mimic the look and feel of the original ones, and they can trick even the most experienced NFT buyers into parting with large amounts of money for fake artwork that is, in reality, worth nothing.
So, how can you avoid falling for this well-constructed kind of scam?
Do your research before investing in NFTs. There are a lot of scam sites out there that will charge you a fraction of their actual huge worth. For example, the NFT ApeGang #4510 is currently priced at 10 ETH, or approximately $39,428.10, on OpenSea’s official website. However, on a scam website, you might see it listed for a fraction of 1 ETH.
If you’re not sure what this NFT’s actual worth, chances are, you’ll be led into thinking that you’re getting a good deal, when, in fact, you’ll be spending a few hundred dollars on a fake artwork.
Also, make sure that the NFT stores have verified usernames on their websites. These will be visible to verified buyers. In fact, 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 Instagram or Twitter.
If you’re looking to buy a more expensive NFT, make sure that the seller is first verified. Doing so will allow you to check the unique properties of the NFT that you’re interested in. Fake NFTs won’t have any properties listed, while real NFTs will.
At last, make sure to check the contract address of your NFT. This will show you where it was minted. A fake store may show an incorrect minting address, while a real one will show the exact location of the coin, where it was minted. So make sure to check the official website of the NFT creator you’re interested in, to see if the contract addresses match up.
- Social Media Impersonation
Larva Labs is a verified Twitter account. However, it is often copied and used by scammers to create fake accounts and pages that resemble the original ones.
On these accounts, the scammers can convince users to purchase fake NFT artworks. This is another way they can make money by selling fake art. These fake social media accounts can also host fake giveaways, which creates a huge risk to not well-informed users.
To avoid getting into trouble, it’s important to check that the username has a verification tick next to it. This is often the only way to verify that the account is authentic. However, not all legitimate NFT social media pages have this tick, so its absence isn’t always a deadly giveaway.
You can also check the social media pages of the NFT creator by performing a quick google search to find them and see if other accounts have similar names with considerably more followers, as this could end up being the legitimate page. You can also check the other accounts of that specific NFT creator to see if they link to other social media.
Aside from fake NFT company accounts, there are also cases where scammers try to use established NFT artists’ usernames and create fake NFT artist accounts. These scammers will try to trick users into buying fake NFT artworks at lower prices. As mentioned in the first scam on this list, if the price seems too good to be true, it’s probably too good to be true. So look out for extreme discounts on NFTs that should cost a lot more.
- Customer Support Impersonation
Scammers can fake legitimate NFT customer service pages to disclose sensitive information from unknowing NFT owners.
This is pretty common on Discord. If you encounter this issue, scammers can ask you for sensitive information in order to ‘fix’ whatever problem you may be having. Hence, immediately report it to the Discord support team.
If you’re concerned about this issue, consider how you’re accessing these Discord servers. Instead of googling a specific server, or looking for it on Discord, try to access it through the NFT creator’s website or social media first. You should also check how many followers the server has if you can’t access it this way, as it’s unlikely a fake server will have thousands of followers.
- Investor Scams
The developer of Evolved Apes, which was an emerging NFT project, jumped ship with $2.7 million in Ethereum after investors poured copious amounts of money into the project.
People who were promised prizes in an Evolved Apes NFT competition via the project’s social media never received them. In the end, it was a huge marketing scheme to raise funds for an eventual rug-pull.
While most people opt to buy NFTs instead of investing in up-and-coming projects, it’s important to think about this kind of scam when investing in the crypto world. Ponzi rug-pulls are far from unheard of in the industry, and it’s worth educating yourself on the risks of investing.
Next time, before you invest in anything, do your own research on the company or the developer and make sure you’re not jumping into something not credible. It saves you a lot of money.
- Giveaway Scams
NFT scams are usually carried out by creating fake social media accounts and using Discord servers to distribute fake prizes. These accounts can then trick users into thinking that they’ve won big. This scam works by posing as a fake NFT account, usually on Twitter or Discord, telling users that they’ve won an NFT. It sends them a link to a fake website where they can connect their crypto wallet and enter their seed phrase.
So basically, if a scammer gets a hold of this phrase, the game is over. This phrase, or password, will give them access to your crypto wallet, where they can take all your funds. And because you can’t change your seed phrase, you won’t be able to change it before the scammer logs in.
And make sure not to click on random links sent to you on social media. Furthermore, check the account that sent you the message to see if it’s legitimate.
And in case you decide to click on the link, check if the URL matches up with that of the NFT company’s website. If it looks unusual, you’re probably about to click on a phishing website.
The NFT Market Is Rife With Scammers, but You Can Avoid Them
It’s scary to think about how many scams you can fall for. Cybercriminals are getting more innovative in finding new ways to trick people.
But if you stay vigilant and aware of what scams are, and how to recognize them, you’ll surely keep yourself safe when investing in NFTs.
If you are interested in learning more about NFT License Agreements or require legal assistance in connection with preparing your customized NFT license agreement, feel free to reach out to us and our expert attorneys will contact you in no time!
Note that the information mentioned in this article is not a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice and the knowledge of an experienced attorney.
Legally Yours,
