Most NFT marketplaces are legitimate, but there have been instances where these marketplaces were created or infiltrated by hackers & scammers.
Like other investments, scams involving online investments happen and can cost victims many dollars. For instance, certain NFT marketplaces are scam websites designed by fraudsters to look like authentic websites to dupe people into disclosing personal information like their crypto wallet’s private key. The problem is that there’s no way they could get back their funds.
Let’s look at the most frequent NFT scams, the best way to avoid them, and why they’re getting more frequent.
Common NFT Scams to Watch Out For
Digital assets trading as NFTs has skyrocketed in recent years, with NFTs now fetching millions of dollars. However, as any marketplace evolves, it’s common for fraudsters to exploit the NFT marketplace to take advantage of uninformed buyers. Here are the most common NFT scams.
1. Rug Pull Scams
The rug pull is a scam that happens when the product’s promoters make it the focus of social media channels, then quit backing it and take investors’ funds after the price has gone up. The value of the NFT rapidly drops to zero, leading to losses for investors who invested in the NFT.
One variant is where the creators of the NFT have removed the capability for selling the currency, and purchasers are unable to sell the token since they have added code to remove this capability.
What to avoid: The first thing to look into is the developers behind the project to determine whether they are legitimate developers who have received favorable reviews on social media. If they have many followers but low engagement, it could indicate a scam.
Use burner wallets, which allow you to restrict the number of dollars you wish to put into a specific purchase. This includes transaction fees and crypto, which reduces your risk.
2. Phishing Scams
NFT Phishing scams include phony advertisements on fake websites and pop-ups, which ask users for private wallet keys or 12-phrases considered as security. Once they have access to your wallet’s keys, fraudsters can hack into your account and wipe out all the NFT and crypto collections.
How to avoid: Never give your wallet’s keys to pop-ups or to suspicious websites. Always use authentic sites for crypto transactions. Never use pop-ups, links, or even your email address to input the wallet’s information.
3. Bidding scams
Bidding scams occur when investors decide to resell the NFTs they buy on an exchange. When they put their NFT to auction on the NFT market, the bidders could change their preferred currency to lesser-valued cryptos without informing you, resulting in a loss of funds.
What to avoid: Double-check the currency before selling.
4. Counterfeit NFTs
It happens when fraudsters copy an artist’s work, then make a fake account on the NFT marketplace, where they offer fake artworks for auction. Buyers who are not aware of the scam will buy from an NFT, which is of no value.
What to avoid: Before investing in an NFT from any marketplace conduct your research to ensure that the NFT you purchase comes authentic and is from the real artist. Most authentic NFT sellers will display the blue checkmark on their usernames.
5. Pump-and-dumps
Pump-and-dump schemes happen when a group buys NFTs to artificially increase demand. Unknowingly investors who believe the NFTs have some worth will enter the auction and begin bidding higher. Once the bids increase, the fraudsters will profitably sell the NFTs, leaving investors with worthless assets.
How to Avoid: Evaluate the NFT’s transaction history and the contact details of the originator in question. Transactions focused on a single day may suggest a pump and dump scam.
The ultimate way to avoid NFT scams
NFT scams commonly operate by getting your login credentials to your cryptocurrency wallet or tricking you into thinking that you have successfully bought or sold an authentic NFT.
To avoid being swindled by these scams, you must follow these guidelines.
Keep your private keys secure: Never share your private key with anyone. Improve your online security by creating strong passwords for your cryptocurrency wallet and other NFT accounts. You may wish to use two-factor authentication for all of your NFT accounts for added security.
Increase your security online: Do not forget to set up secure passwords for your crypto wallets and your other NFT accounts. To increase security, you may want to use two-factor authentication for all of your NFT accounts.
Deal with legitimate websites: avoid the allure of deals and dubious blockchain networks. If this is the case
Before investing, do your research: Evaluate the reviews, the amount of participation from the creators, and any past complaints about their transactions. Always use caution and make purchases only when you are confident in the facts.
Always confirm the NFT price: Before making an NFT purchase, check the price on a legitimate trading platform, such as OpenSea, Axie Marketplace, OpenSea, Rarible, or Mintable. If the price appears lower than what’s shown on the official trading website, it’s most likely a scam.
Final Thoughts
Like other investments, scams involving fake NFT marketplaces happen. These sites are designed by thieves who use fake company names to trick you into giving away your information and money.
Fortunately, there’s one thing we can do to keep ourselves safe: only invest in trustworthy sites.
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