How to detect NFT scams

Apr 03, 2023
18:04
2 min reading

Choise.com team

What are NFTs and how do scams work?
Types of NFT scams
Examples of NFT scams
How to avoid NFT scams
How to report the NFT scam
Key takeaways on detecting and avoiding NFT scams
NFT scams: frequent questions

What are NFTs and how do scams work?

NFTs, or non-fungible tokens, are unique digital assets that are stored on a blockchain, typically on the Ethereum blockchain. Unlike cryptocurrencies like Bitcoin or Ethereum, which are fungible and interchangeable, NFTs are one-of-a-kind and cannot be exchanged for something else.

NFTs can represent a wide range of digital assets, including digital art, music, videos, and even tweets. When someone buys an NFT, they are buying ownership of the original digital file that the NFT represents.

NFT scams can occur when someone tries to sell a fake or fraudulent NFT to an unsuspecting buyer. There are several ways that scammers can carry out NFT scams:

Fake NFTs: Scammers may create fake NFTs that mimic popular digital assets. They may use similar names, logos, or designs to trick buyers into thinking they are buying the real thing.
False promises: Scammers may promise buyers that the NFT they are selling will increase in value over time, even though they have no evidence to back up their claims.
Fake marketplaces: Scammers may create fake marketplaces or use phishing attacks to trick buyers into entering their personal information or sending money to a fraudulent account.
Pump and dump schemes: Scammers may artificially inflate the price of an NFT by using bots or other tactics to drive up demand. Once the price reaches a certain point, they may sell their NFTs for a profit, leaving buyers with worthless assets.

Types of NFT scams

Impersonation

Impersonation NFT scams are a type of NFT scam where the fraudster creates an NFT that impersonates a well-known individual, brand, or company. The goal of the scam is to trick buyers into thinking they are buying an NFT that is associated with a reputable entity, when in reality, they are purchasing a worthless digital asset.

To carry out an impersonation NFT scam, the fraudster may create an NFT that uses the name, logo, or likeness of a celebrity, musician, or well-known brand. They may also create a social media account or website that looks like it is associated with the entity they are impersonating.

Once they have created the fake NFT and associated marketing materials, the fraudster will try to sell the NFT to unsuspecting buyers. They may make false promises about the NFT's future value or try to create a sense of urgency to encourage buyers to act quickly.

To avoid impersonation NFT scams, buyers should be cautious when purchasing NFTs associated with well-known individuals, brands, or companies. They should do their research and only buy NFTs from reputable sources. If in doubt, they should reach out to the entity being impersonated to verify the legitimacy of the NFT.

Rug pulls

Rug pull NFT scams are a type of NFT scam where the fraudster creates an NFT project with the intention of deceiving buyers and then disappearing with their money. The name "rug pull" comes from the fact that the scammer pulls the "rug" out from under the buyers, leaving them with a worthless asset and no way to recover their investment.

To carry out a rug pull NFT scam, the fraudster will create a new NFT project and promote it heavily on social media and other channels. They will typically offer the NFTs for sale at a low price and promise buyers that the price will go up quickly, creating a sense of urgency to buy.

Once buyers have invested in the NFT project, the fraudster will suddenly sell off all their own NFTs and disappear, leaving buyers with a worthless asset and no way to recoup their investment.

To avoid rug pull NFT scams, buyers should be cautious when investing in new NFT projects. They should research the project and its creators thoroughly and only invest what they can afford to lose. They should also be wary of anyone making unrealistic promises or creating a sense of urgency to buy.

Pump and dump schemes

Pump and dump schemes in NFT scams involve fraudsters artificially inflating the price of an NFT through misleading marketing tactics, hype, and other techniques. They then sell their own NFTs at a high price, leaving buyers with a worthless asset once the price inevitably drops.

To carry out a pump and dump scheme in an NFT scam, the fraudster will often create a sense of hype and excitement around a particular NFT project. They may use bots to create artificial demand for the NFT, make false promises about the future value of the asset, or use other manipulative tactics to get buyers to invest.

To avoid falling victim to pump and dump schemes in NFT scams, buyers should look for legitimate, long-term value in NFTs rather than get-rich-quick schemes.

Phishing scams

Phishing NFT scams are a type of scam where fraudsters create fake websites or social media accounts that mimic legitimate NFT marketplaces or platforms. The goal of the scam is to trick users into giving away their private keys or personal information, which the fraudsters can then use to steal their NFTs or cryptocurrency.

To carry out a phishing NFT scam, the fraudster may create a website or social media account that looks like a legitimate NFT marketplace or platform. They may then send phishing emails or social media messages to NFT owners, asking them to log in to their accounts or provide their private keys or personal information.

Once the fraudster has access to the user's private keys or personal information, they can steal their NFTs or cryptocurrency. They may also use the stolen information to carry out other types of fraud or identity theft.

To avoid phishing NFT scams, users should be cautious when clicking on links in emails or social media messages. It is also important to use two-factor authentication and to keep private keys secure.

Customer support scams

Customer support NFT scams are a type of scam where fraudsters impersonate the customer support staff of a legitimate NFT marketplace or platform. The goal of the scam is to trick users into giving away their private keys or personal information, which the fraudsters can then use to steal their NFTs or cryptocurrency.

To carry out a customer support NFT scam, the fraudster may create a fake customer support email or social media account that looks like it is associated with a legitimate NFT platform or marketplace. They may then reach out to NFT owners, posing as customer support staff, and ask them to log in to their accounts or provide their private keys or personal information to resolve an issue.

To avoid customer support NFT scams, users should always verify that they are communicating with the legitimate customer support staff of an NFT platform or marketplace. They should also be wary of anyone asking for private keys or personal information, as legitimate customer support staff will never ask for this information.

Bidding scams

Bidding NFT scams are a type of scam where fraudsters manipulate the bidding process on an NFT auction platform to win an auction and then disappear with the buyer's money without delivering the NFT.

To carry out a bidding NFT scam, the fraudster will bid on an NFT auction with a fake account or use bots to drive up the price of the auction. Once they win the auction, they will disappear without delivering the NFT, leaving the buyer with a worthless asset and no way to recover their money.

To avoid bidding NFT scams, buyers should be cautious when bidding on NFT auctions. They should be wary of anyone using bots or manipulating the bidding process, and they should report any suspicious behavior to the auction platform. Finally, they should only use reputable and secure payment methods to ensure that their money is protected in case of fraud.

Counterfeit NFTs

Counterfeit NFTs are fake NFTs that are designed to look like legitimate NFTs. They are created by fraudsters who want to take advantage of the high demand and value of NFTs.

To create a counterfeit NFT, a fraudster will usually copy the artwork, metadata, and other information from a legitimate NFT and then create a new NFT that appears to be identical. They may then sell the counterfeit NFT on a marketplace, often at a lower price than the legitimate NFT, in the hopes of tricking buyers into purchasing the fake asset.

To avoid purchasing counterfeit NFTs, buyers should only purchase NFTs from reputable marketplaces. They should also verify the authenticity of the NFT by checking the metadata and other information associated with the NFT to ensure that it matches the information on the blockchain. It is also important to be wary of any NFTs that are being sold at unusually low prices, as this may be a sign of a counterfeit NFT.

NFT giveaway or NFT airdrop scams

NFT giveaway or NFT airdrop scams are a type of scam where fraudsters claim to be giving away free NFTs or conducting NFT airdrops. They use this as a pretext to trick users into giving away their private keys or personal information, which the fraudsters can then use to steal their NFTs or cryptocurrency.

To carry out an NFT giveaway or NFT airdrop scam, the fraudster may create a social media post or email announcing a giveaway or airdrop of free NFTs. They may ask users to log in to their NFT wallet or provide their private keys or personal information to claim their free NFTs.

To avoid NFT giveaway or NFT airdrop scams, users should be cautious when responding to any unsolicited offers of free NFTs and be wary of any offers that seem too good to be true, as they may be a sign of a scam.

Investor scams

Investor NFT scams are a type of scam where fraudsters create fake NFT projects and use them to trick investors into giving away their cryptocurrency or private keys.

To carry out an investor NFT scam, the fraudster will create a fake NFT project with a website, social media presence, and whitepaper that appear to be legitimate. They may also use fake celebrity endorsements or other marketing tactics to make the project seem more credible.

Once they have gained the trust of investors, the fraudster will then ask them to invest in the project by sending cryptocurrency to a wallet address or by providing their private keys. Once the fraudster has access to the investor's cryptocurrency or private keys, they will disappear with the funds, leaving the investor with nothing.

To avoid investor NFT scams, investors should be cautious when investing in any new or untested NFT projects.

Examples of NFT scams

Fake celebrity NFTs: In March 2021, a fraudster created a fake Elon Musk NFT and sold it for $1.5 million on the NFT marketplace, Rarible. The NFT was later revealed to be a scam, and the buyer was unable to recover their funds.
Fake NFT projects: In February 2021, a fake NFT project called "Homer Pepe" appeared on the NFT marketplace, OpenSea. The project was a scam, and the fraudster disappeared with the funds raised from investors.
Counterfeit NFTs: In March 2021, a counterfeit Beeple NFT sold for $1.3 million on the NFT marketplace, Nifty Gateway. The buyer later discovered that the NFT was fake, and was unable to recover their funds.
Phishing scams: In April 2021, a phishing scam targeted users of the NFT marketplace, SuperRare. The scam involved fraudsters sending fake emails that appeared to be from SuperRare, asking users to provide their private keys.
Investor scams: In March 2021, a fake NFT project called "Uniwhales" appeared on the NFT marketplace, OpenSea. The project was a scam, and the fraudster disappeared with the funds raised from investors.

How to avoid NFT scams

The first thing to avoid NFT scams is to research the NFT project and team before investing. Check the project's website, social media presence, and whitepaper. Look for information about the team and their experience in the industry. Be wary of any projects that have a vague or incomplete description of their goals and objectives.

Also, stick to using reputable NFT marketplaces that have a track record of being secure and trustworthy. Look for marketplaces that have a strong reputation and a large user base.

Be cautious when buying NFTs that claim to be one-of-a-kind or rare. Look for verification from reputable third-party sources, such as the NFT issuer or a trusted authenticity service. Be wary of any unsolicited offers of free NFTs or investment opportunities. Scammers often use these tactics to trick users into giving away their private keys or personal information.

Always use two-factor authentication to add an extra layer of security to your NFT wallet. This can help protect your funds in case your private keys are compromised. Keep your private keys secure and never share them with anyone.

Last but not least, don't invest more than you can afford to lose, and be cautious of any projects that promise high returns or use aggressive marketing tactics. Remember that NFTs are a speculative investment, and their value can be volatile.

How to report the NFT scam

If you have been the victim of an NFT scam or have come across an NFT scam, you should report it to the appropriate authorities. Here are some steps you can take to report an NFT scam:

Contact the NFT marketplace: If the scam occurred on an NFT marketplace, contact the marketplace's support team and report the scam. They may be able to investigate the scam and take action to prevent it from happening to other users.
Contact law enforcement: If you believe that you have been the victim of a criminal NFT scam, you should contact your local law enforcement agency and report the scam. They may be able to investigate the scam and take legal action against the fraudster.
Contact the Federal Trade Commission (FTC): If you are in the United States, you can report NFT scams to the FTC. They have a website where you can file a complaint and provide details about the scam.
Report to the cryptocurrency community: You can also report NFT scams to the wider cryptocurrency community through social media or cryptocurrency forums. This can help raise awareness of the scam and prevent others from falling victim to it.
Report to the Anti-Phishing Working Group (APWG): If the scam involves phishing, you can report it to the APWG. They have a website where you can report phishing scams and provide details about the scam.

Remember to provide as much information as possible about the scam, including any emails or messages you received, any wallet addresses used by the fraudster, and any other details that may be helpful in the investigation.

Key takeaways on detecting and avoiding NFT scams

To reduce your risk of falling victim to an NFT scam and help protect your investments, be wary of offers that seem too good to be true. Watch out for red flags, such as promises of quick returns or high profits. Also be aware of different types of NFT scams and report any suspicious activity to the appropriate authorities, such as the NFT marketplace or law enforcement agencies.

NFT scams: frequent questions

How do I spot a fake NFT?

Check the issuer: Make sure the NFT was issued by a reputable source. Check the creator's website, social media presence, and the NFT marketplace's verification process. Verify that the issuer has a good reputation and that the NFT is being sold on a legitimate marketplace.
Check the metadata: Every NFT has metadata, which includes information about the creator, date of creation, and other details about the NFT. Check the metadata to verify that it matches the creator's information and that it is consistent with the details provided on the NFT marketplace.
Verify the ownership: Check the ownership history of the NFT on the blockchain. Look for the NFT's smart contract address and check the transaction history to see if it has been previously sold. If there are multiple copies of the NFT, make sure you are buying the original and not a copy.
Look for inconsistencies: Check the NFT's images and descriptions for any inconsistencies or errors. Be wary of NFTs that have images or descriptions that don't match the creator's style or brand.
Check the community: Check the NFT's community, including the creator's social media channels and any forums or groups associated with the NFT. Look for feedback and reviews from other users and verify that the creator has a good reputation.
Get an expert opinion: If you're unsure about the authenticity of an NFT, consider getting an expert opinion. There are services and companies that specialize in verifying NFTs and can help you determine if an NFT is authentic.

Are NFT airdrops a scam?

Not all NFT airdrops are scams, but some of them can be.

An NFT airdrop is a marketing strategy used by creators to distribute free NFTs to a large number of people. This is often done to generate buzz around a new project, increase the visibility of the creator, and attract new users to their platform or marketplace.

However, scammers can also use NFT airdrops as a way to trick people into giving away their private keys or other sensitive information. Buyers should be cautious of unsolicited offers and do their own research before participating in any airdrop.

What rights do I get when I buy an NFT?

When you buy an NFT (Non-Fungible Token), you are essentially buying a digital asset that is verified on a blockchain.

The specific rights and benefits that come with an NFT purchase can vary depending on the project and the terms of the sale. However, in general, here are some common rights that NFT buyers may get:

Authenticity;
Ownership of the unique digital asset, meaning the right to transfer, sell, or display the NFT;
Access to exclusive content or experiences that are not available to non-owners;
Right to receive royalties or a share of the revenue generated by the asset;
Creator support.

The specific rights and benefits that come with an NFT purchase can vary depending on the project and the terms of the sale.