Common NFT Scams And How To Avoid Them | INQUIRER.net USA
 
 
 
 
 
 

Common NFT Scams and How to Avoid Them

/ 10:12 AM May 27, 2022

Cryptocurrencies and NFTs remain popular despite the ongoing crypto market crash. Unfortunately, this wave of innovation has numerous crypto and NFT scams riding it. Many people still do not understand these concepts, so scammers quickly took advantage.

Despite these schemes, the world is still trying to adopt these digital assets. In response, you should learn how to avoid NFT and cryptocurrency scams. Fortunately, this article will share all the details you need about cryptos, non-fungible tokens, and the scams surrounding them.

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We will begin by discussing the list of NFT and crypto scams. That way, you can learn more about how they work and how to avoid them. Later, you will also learn more about these digital assets to distinguish the real projects from the fake ones.

Here are the most common crypto scams:

  1. Rug pull scams
  2. Phishing scams
  3. Fake NFTs
  4. Pump-and-dump crypto scams
  5. Bidding scams
  6. Fake NFT giveaways or airdrops
  7. Sketchy storage platforms

1. Rug pull scams

Think of a hyped crypto or NFT project as a “rug.” A scammer would start a rug pull scheme by heavily promoting his project on social media. His goal is to get as many investors as possible.

As he convinces more people, more of them will stand on that “rug.” Then, the scammer will suddenly discontinue his project or “pull the rug” from under those people.

As a result, the value of these cryptocurrencies and NFTs from the scam will immediately drop to zero. People lose money as the scammer gets away with all their funds.

Rug pulls are arguably the most common type of crypto scam. Anyone can create a social media account for free, and people with enough charisma could pull off this scheme.

The only hurdle is that the scammer needs enough skill to create a cryptocurrency or NFT. that person is ready for a rug pull scam after meeting this requirement.

These scammers will typically exaggerate how much money people could make from the NFT collection or cryptocurrency. Also, they will show footage of themselves investing and profiting from the project.

It can be easy to be fooled by this because you could confirm its initial coin offering or NFT release via an online search. Still, you can avoid these crypto scams by doing more research.

Start by looking for its homepage. See if the NFT collection or cryptocurrency has legitimate developers and artists behind them. Moreover, visit their social media accounts.

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You might find that they have a lot of followers. Take a closer look, and you might find that barely anyone discusses their crypto or NFT. Those people could be the potential victims of a scam!

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If the people behind the NFT or crypto have solid track records and active social engagement, their project is probably genuine. Otherwise, it is best to avoid their projects.

2. Phishing scams

Phishing involves using fake websites and adverts that ask for security seed phrases and private keys. Their owners will then get into your accounts and take all the digital assets inside.

This scheme is one of the most prevalent cryptocurrency scams because it has been around before cryptos existed. Phishing has been fooling people since the internet started.

You can find phishing attempts to request bank account info instead of crypto credentials. Fortunately, you can avoid the old and new phishing schemes using the same method.

Never provide sensitive information to suspicious pop-ups and webpages. Stay on verified websites for your crypto transactions. Avoid links, emails, or pop-ups that volunteer to direct you to a legit website.

Believe it or not, scammers can create fake versions of real websites. Clicking their ads or links could fool people into believing they are on a reputable platform.

3. Fake NFTs

A massive problem with non-fungible tokens or NFTs is that some people use them to steal work from other people. Scammers could download a piece of digital art and sell it as their NFT.

They would take that piece of art and mint it on an NFT platform like Ethereum (ETH). People unfamiliar with the art piece would buy the NFT, which has no value in the community.

Those folks would feel buyer’s remorse once they try selling their NFT to no avail. Meanwhile, the scammer walks away with all their funds. Also, the original artist could lose revenue from the scheme.

Their potential buyers might have been disappointed by the scam, so they will struggle to profit from their work. Worse, the scheme betrayed their artistic integrity.

You can avoid such an NFT scam by performing a quick image lookup. Drag the image of that photo into Google Images. It is probably a fake if you find other artists who own the piece.

Moreover, look for a blue checkmark beside the seller’s username. Like Twitter, that dot confirms the identity of an NFT seller. If you are an artist, you may also avoid falling victim to these schemes.

You can place a copyright on your digital art to prevent people from illegally distributing and selling your collection. You could also fight by turning your work into NFTs.

Scammers cannot register your work as an NFT if you do it first. The world of digital art changed due to technology. Artists should keep up with the latest trends to protect their work.

4. Pump-and-dump crypto scams

It is easy to think that rug-pull scams and pump-and-dump scams are the same. As mentioned earlier, a rug pull involves convincing people that they should invest in fake crypto or NFT projects.

On the other hand, a pump-and-dump involves artificially driving the value of a non-fungible token or cryptocurrency. Scammers do this by purchasing them en masse.

People may think that the project is highly lucrative, so they may start placing their money in them too. Once the price hits a specific level, the scammers will sell the NFTs and cryptos.

As a result, they leave the investors with non-valuable assets. The difference between pump-and-dumps and rug-pulls is that the former involves scammers putting their money into a cryptocurrency or NFT.

The latter depends on other people to raise the prices themselves. Still, a pump-and-dump schemer could boost the price themselves to set off their rug-pull scam.

Both are common cryptocurrency scams, so many people think they are the same. You can avoid this kind of scheme by looking at the transaction history.

If you find a considerable volume of transactions in one day, that is a red flag. That could be the date when the scammer pumped the cryptocurrency or NFT so that he could dump them later.

5. Bidding scams

Unsuspecting buyers are not the only victims of cryptocurrency scams. Sometimes, sellers can fall prey to schemes such as bidding scams. To show how this works, let us say you bought your first NFT.

You probably bought it directly from a website or a mainstream exchange platform like Binance. You can make money from that by selling it on a secondary market.

These are auction websites like OpenSea that connect sellers and buyers. You list your NFT and then wait for people to submit an amount of money they are willing to pay for your collection.

The auction typically lasts until a specific date. The last amount submitted on that deadline secures the NFT purchase. Unfortunately, some buyers could take advantage of how the bidding works.

They might change the currency at the last minute. For example, the bidding scammer might switch the ETH payment into US dollars. At the time of writing, an Ethereum coin or Ether costs roughly $1,851.57.

If you asked for 5 ETH, you should receive around $9257.85. Switching the payment method to USD will drop your earnings to only $5.00! You can prevent this by learning how your NFT marketplace works.

See how buyers could change the transaction terms. If a potential client negotiates for a lower price, do not let them. That could be the moment they needed for their bidding scam!

6. Fake NFT giveaways or airdrops

Some crypto exchanges host NFT giveaways. They could come from the platform itself or other projects on the network. Believe it or not, actual companies are doing the same nowadays.

For example, Burger King launched an NFT campaign that lets diners win non-fungible tokens from their meals. The latest Samsung TV sets also come with NFT platforms.

Sadly, you can find schemes involving fake NFT projects. Some pose as genuine NFT trading platforms, while others promote phony NFT giveaways.

Scammers will offer free NFTs if you share their page and register on their website. Then, they will tell you to link your crypto wallet to receive your prize.

After you have done so, they will open your wallet to take your NFT and crypto investments. You can avoid such cryptocurrency scams with the help of social media pages.

See if they have a valid social media account. Moreover, make sure the link the project head sends you matches the one on his company’s URL.

You can boost safety by having a separate crypto wallet. Fill that spare wallet with the amount you are willing to spend on such projects. If they become giveaway scams, you will not lose the private keys to your main wallet.

7. Sketchy storage platforms

This next NFT scam works with the common misunderstanding about how non-fungible tokens work. Let us take a famous NFT project like Bored Apes as an example.

People are familiar with the collection as a bunch of monkey pictures. That is why they often refer to them as Bored Ape NFTs. Others do it for the sake of simplicity.

Contrary to popular belief, the image is not the NFT. Instead, it is a smart contract inside a cryptocurrency network or blockchain. The non-fungible token assigns you as a physical or digital object owner.

Unfortunately, some people can take advantage of people who do not know this distinction. They could send a phony NFT that only links to a URL of a photo.

Unsuspecting people would believe they have an NFT since they have the image in their possession. You can avoid these schemes by sticking to reputable platforms.

Those have systems that ensure that they only list legitimate NFTs. Still, make sure the transaction terms state that you receive the NFT and its asset upon payment.

NFT scams vs. cryptocurrency scams

This represents an NFT scam.

People also assume that NFT scams and crypto scams are the same. Now that you know non-fungible tokens, you should also learn more about cryptocurrencies.

This info will help you distinguish between their schemes. A cryptocurrency is a payment method with cryptography protecting it. Cryptos are also part of decentralized computer networks called blockchains.

Unlike other networks, they do not have a central hub controlling the computers. Each one contributes to the operation of the blockchain.

They confirm cryptocurrency payments to earn more cryptos in return. As time passed, crypto networks offered more features, such as non-fungible tokens.

You use cryptos to purchase NFTs. They are closely related, so it is not surprising that common cryptocurrency scams and NFT scams are similar.

For example, you can find free money promises for NFT and crypto projects. You can also classify some cryptocurrency investment scams as rug-pulls and pump-and-dumps.

Read More: How Cryptocurrency Scams Work

NFTs and cryptos are not scams

This represents an NFT scam.

When writing, the crypto market is crashing as popular digital currency UST stablecoin fails its clients. It is no wonder that people now have a negative view of the crypto world.

Many people now dismiss all these assets as mere investment scams. You will find numerous reputable companies investing in cryptocurrencies if you look closely.

You saw examples such as Burger King and Samsung earlier. These companies continue to allocate billions of dollars into virtual currency and similar assets despite the widespread doubt.

Note that people can spot cryptocurrency scams because they use old methods. As mentioned earlier, phishing scams targeted bank account holders before taking on crypto investors.

Fake websites have been part of the internet even during its early days. You may also compare the common crypto scams with the following age-old schemes:

  • Extortion scams – A group of hackers once breached the Colonial Pipeline. Its managers agreed to pay the hackers in bitcoins so that they would stop their attack.
  • Giveaway scam – You can still find advertisements and websites that tell you to share sensitive information to win a prize or free money.
  • Credit card fraud – Scammers could pose as you while using your credit card information. That way, they can take your funds as free money. If they have your security codes, people could do that with your digital wallet.
  • Impersonation – Some people take phishing to the next level by impersonating other people or financial institutions. They could pose as someone famous like Elon Musk and ask you to send cryptocurrency so that they could return more to you. Scammers pretended to be bank representatives to take credit card info back then.
  • Pump-and-dump – Before cryptocurrencies were prevalent, pump-and-dumps were for penny stocks. Scammers could jack up the price of a stock by buying a lot of it. Eventually, people feel encouraged to invest money in the stock. Once the price is high, the scammers could sell their shares.

NFTs and crypto coins are new technologies, so people do not know much about them. That is why scammers take advantage of this lack of knowledge.

Conclusion

Every asset has scams, so you should expect them as an investor. You have to learn all about cryptocurrencies and non-fungible tokens.


We have discussed the common crypto scams, but that is not enough. You will need to learn how to buy, sell, store, and send cryptocurrency. Learning about their networks will also help you.

If you encounter a cryptocurrency scam, immediately report it to the Federal Trade Commission (FTC) and the Commodity Futures Trading Commission (CFTC).

Note that this article does not share investment advice. Learn all about these assets before investing to not fall for a cryptocurrency scam.

Frequently asked questions

How do I confirm that my NFT is legit?

Make sure your NFT came from a reputable network and marketplace. Also, confirm that your non-fungible token comes with your intended image or other media.

Are NFTs a good investment?

You could make money from an NFT if you find a willing buyer. However, you will need enough skill to persuade people to purchase your collection.

Will someone buy my NFT?

You might find a buyer by listing on reputable marketplaces. However, you will need to be a great marketer to convince people to pay a lucrative price for your digital collection.

Is it easy to sell an NFT?

It can be challenging to sell non-fungible tokens. You will need negotiation skills to convince potential buyers. Also, you need to have an attractive NFT, one from a well-known artist or celebrity.

How can I spot an NFT or crypto scam?

Scammers promise easy and free money from cryptos and NFTs. Contact the Federal Trade Commission immediately if you see warning signs with an initial coin offering or similar project.

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