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If you’re wondering, ‘what is not a scam?’ This article reveals all you need to know, including how to report NFT scams. NFT scams is a fraudulent activity that involves selling or promoting fake, plagiarized, or worthless NFTs. The non-fungible tokens (NFTs) market has increased in value over the years, boasting over a hundred billion dollars worth.
However, the increase in value and profitability has spurred the rise of fraudulent activities. Scammers have developed numerous ways like phishing, catfishing, running fake giveaways, and rug pull to scale unsuspecting individuals. About ⅔ of the NFTs minted on OpenSea are fake, and this article reviews how to identify them and the common NFT scam techniques used in the biggest NFT scams.
Most Common Types of NFTs Scams
You’re at risk of getting scammed if you don’t know how NFT scams work and how to avoid NFT scams. Here, we list the most common NFTs scam techniques scammers use. They include:
- 1) Plagiarism
Non-fungible tokens are meant to be unique and irreplaceable. However, scammers sometimes reproduce existing NFTs without the owner’s permission and sell them to unsuspecting individuals. These NFTs are known as “Plagiarized NFTs.” The practice violates copyright and intellectual property rights. Buyers may lose ownership right when they purchase a plagiarized NFT if the original creator sues for infringement and provides proof of ownership.
- 2) Phishing
This NFTs scamming technique involves using fake or spoofed websites, emails, or other forms of communication to trick people into giving up sensitive information or funds or lure them into participating in a fake NFT project. It is one of the most popular NFTs scams and usually occurs through the mail and social platforms like Twitter and Discord. OpenSea is one of the popular non-fungible token (NFTs) marketplaces that has suffered phishing attacks. Around February 2022, the platform lost about $1.7 million NFTs to this NTFS scam.
- 3) Airdrop/Giveaway Scams
Airdrop and NFT giveaways are common promotion techniques for NFT projects. However, scammers with fake projects can leverage this technique to get sensitive information from unsuspecting individuals or get them to put in their funds. It involves offering free NFTs, typically through social media or other online platforms, as part of a promotion or giveaway.
However, to get these NFTs (which are most times worthless or non-existent), individuals may need to provide some sensitive information or make a commitment with money. They can ask you to register on a website, or purchase a certain amount, to get a specified NFTs worth free. All this usually turns out to be a ploy to defraud unsuspecting individuals.
- 4) Impersonation/Catfishing Scams
This type of NFT scam involves using a fake identity (usually that of a legitimate creator or seller) to defraud others by selling worthless, fake, or plagiarized NFTs. The scammer creates accounts replica of a reputable NFT seller or creator and interacts with potential buyers using these accounts. Such a scammer either sells fake NTFs or goes AWOL after receiving payment. It’s one of the most common and can be combined with others.
- 5) Pump and Dump NFTs Scams
In this NFTs scam type, scammers create a FOMO by spreading fake information and giving false hope about the non-fungible token (NFT), prompting many to buy the asset. Afterward, they opt out of the project by selling their holdings at the inflated price, and the NFTs price will gradually/drastically drop afterward.
- 6) Bidding Scams
A bidding scam is a common NFT scam in the secondary market. It’s usually targeted at NFTs sellers. Bidding scams work via cryptocurrency manipulation. When an unsuspecting seller puts their collection up for sale, scammers place the highest bid, attracting the seller to sell to them. However, they change the cryptocurrency used for bidding to one of lesser value without the seller’s knowledge. Double-checking the crypto asset you’re receiving as a seller, and ensuring it’s equivalent to the agreed value is an effective way to avoid these scams.
- 7) Rug Pull NFTs Scam
Rug pull NFT scams occur when an NFT creator hypes up an NFT but pulls out of the project after realizing huge among investors. The unscrupulous developers start by building a community and gaining trust while luring investors to fund their creations by selling dreams of high returns. Once they have enough investment, they’ll typically shut down the project and make away with investors’ funds. They offer various perks like exclusive minting passes, NFTs giveaways, dibs on virtual games, etc. This usually attracts more people to participate in the project, helping them realize a huge amount.
- 8) Technical/Customer Support NFTs Scam
This NFT scam involves posing as a support agent for popular NFTs marketplaces, e.g., Opensea. These scammers integrate themselves into different NFTs communities and contact individuals with problems regarding their accounts. They offer to help and send links for you to fill in your complaints and other sensitive details like private keys. These scammers access your portfolio holdings through this means and siphon all you have.
- 9) Fake Influencers
NFT project developers sometimes hire individuals with large followings to hype up a project and get people to invest in it. These projects usually appear real, but in the long run, they turn out to be a scam. Hired influencers play the role of selling false dreams and hope about the project. They give estimated projections without any analytical backing and make the project look like something you shouldn’t miss. Unsuspecting individuals rush to join these hyped projects early, with hopes of earning huge returns when it rises. However, as soon as the number of investors becomes tangible, the developers dump the project.
- 10) Website Scams
This NFTs scam involves building a fake website that’s an exact replica of an NFT marketplace or platform. The website will have the features and utilities of conventional platforms for buying and selling non-fungible tokens (NFTs), but it’s not real. Scammers create websites like this to defraud unsuspecting NFT traders. Usually, they allow trading to go on normally for a little while before going off the server when the trading volume becomes huge.
Useful Tips to Avoid Common NFTs Scam Techniques
Since you can now answer ‘how do NFTs scams work?’ It’s important to know tips that can help you evade any scam plot. Here are things to keep at the back of your mind:
● Do not ignore red flags. Unusual ROI, pressure to buy quickly, lack of transparency, no clear use cases, and unnecessary celebrity endorsement are some things you should look out for.
● Avoiding clicking links from every source. Be careful of the links you click, and don’t give out your sensitive information online.
● Enable multi-factor authentication on your accounts and key your password/private keys/seed phrase private.
● Always carry out background checks on an NFT seller before transacting.
● Use VPNs to keep your online activities anonymous.
● Only trade on reputable platforms or NFTs marketplace.
● Do not respond to any customer support that’s not officially related to your trading platform.
Rug-pull, phishing, pump, and dump are fast becoming rampant NFTs scams, and investors in this sector are losing millions of dollars to scammers. Being mindful of links to click, verifying the seller’s identity, choosing only reputable platforms, and ensuring multi-factor authentication are ways to avoid these scams. It’s important to know about them and how they work, as it enables you to identify the signs quicker. You can always contact your trading platform’s support to report any potential scam and raise alarm in the community.