The NFT market is experiencing unprecedented growth, which brings with it the potential for scams. Cryptocurrency hackers are taking advantage of this growing popularity to take advantage of unsuspecting individuals by defrauding them of their hard-earned funds.
Fortunately, there are steps you can take to protect yourself against NFT scams. These include using trusted NFT exchange markets and never sharing your crypto wallet information with anyone.
Phishing
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NFT scams are on the rise, and one of their primary methods is phishing. Phishing involves fraudsters impersonating legitimate businesses or government agencies in order to obtain your personal information through various methods such as email or phone call.
Phishing emails typically employ provocative language to pique your interest and prompt you to click on the link. Unfortunately, once you do, a malicious program can silently install itself on your computer and collect all of your private information – such as bank account details, social security numbers, credit card numbers, and more – without you even realizing it.
Spear phishing is another type of phishing, which targets specific people or enterprises. This requires more sophisticated knowledge about an organization’s power structure and internal communication channels. Furthermore, the perpetrator will know how to target specific users with precision and gain access to their private information.
Spear phishing is often employed to defraud those working at large organizations. The perpetrator will pose as an authoritative figure such as the CEO and then use various techniques to obtain sensitive information.
Phishing messages can take many forms, such as email, voice calls and even text messages. Typically, these phishing attempts ask you to update your account details or send a payment; their aim is usually to gain access to both of your money and/or sensitive information.
Phishing is an increasingly common way for hackers to access digital wallets. They use fraudulent websites, emails and pop-ups to trick people into connecting their private wallet keys and authorizing them to access their cryptocurrency. Once hackers have this information, they can steal NFTs or other types of crypto from your digital wallets.
In addition to phishing, hackers may target social media accounts and forums dedicated to NFT artists or projects. These accounts could be compromised in order to defraud followers and investors of funds.
NFT artists and project developers often enjoy a large social media following. While this can be an advantageous means for promoting new work and connecting with fans, it also poses a potential trap for cybercriminals.
Rug-pull
The phrase “rug pull” comes from an American expression meaning to “pull the rug out from under someone.” A crypto scam known as a rug pull occurs when developers lure early investors with promising projects but then abruptly and intentionally abandon them. Either they take their tokenized funds from investors or sell off pre-mined NFTs, leaving behind the community in need.
Typically, these schemes target decentralized finance projects (DeFi). They entice a crowd of eager crypto investors with promises that their tokens will “moon” (increase in value) once the venture launches. Unfortunately, once this hype reaches its peak, developers quickly liquidate their shares and leave, leading to sharp drops in the value of remaining investors’ tokens.
Rug pulls can be tricky to detect, but there are some basic red flags you should watch out for when considering a crypto project. The most frequent red flag is that the team lacks experience or an objective vision for how their venture will function.
Another red flag should be raised if there are many complaints received from users regarding the project’s governance. The more complaints a project receives, the higher its likelihood of being an elaborate scam.
One of the most frequent scams is known as “pump and dump.” This scheme utilizes fake public hype to attract large groups of crypto investors who then join in on pumping up the price of a newly created scam token. Once it reaches its highest point, however, scammers will suddenly withdraw or sell their liquidity from the project, rendering it worthless.
Another type of rug pull involves the “limiting sell order.” This scam occurs when crypto developers restrict buy orders for a particular cryptocurrency token and then withdraw from the pool. Scammers could do this right from the start or wait until after it has traded on an exchange before caching their profits.
Recent litigation in the NFT space involved two 20-year-old hackers who operated a crypto rug pull called “Frosties.” Their scheme reportedly netted them $1.1 million, but they were arrested by US authorities and charged with fraud. Prosecutors also claimed they were part of an extensive conspiracy involving Aurelien Michel, founder of Mutant Ape Planet NFT collection.
Giveaway
Giveaways are a popular marketing tactic used by many brands to showcase their products and services. They’re often accompanied by social media posts, which can increase brand recognition and generate excitement surrounding the product.
Giveaways are typically free or discounted items offered in exchange for taking action such as signing up to a newsletter or entering a competition. By doing this, businesses can gain exposure and build an engaged community.
However, giveaways can also be used to defraud people. Scammers create online social media profiles and use these accounts to distribute fake NFT giveaways across the web.
These campaigns, also referred to as airdrop scams, promise free NFTs to anyone who spreads the word or signs up on a website. Once they possess someone’s cryptocurrency wallet information, however, they can take any NFTs or money in their account and resell them at a profit.
Scammers often create and share links through Discord or other official channels, offering users the promise of a free NFT in exchange for connecting their crypto wallets. Unfortunately, many victims end up losing large amounts of money from their crypto holdings in this process.
Another popular NFT scam involves bidding on an NFT and then changing the currency to something with a lower value. For example, someone might bid five ETH for an NFT but when paying, they change the decimal one number to something lower – usually leading to much cheaper payments than originally intended.
NFTs can be an attractive source of cryptocurrency earnings, yet they’re also vulnerable to fraud and scams. To minimize your risk of becoming scammed, keep both your private key and seed phrase secure. It is also recommended to utilize two-factor authentication when making transactions on official websites or NFT marketplaces.
Investor
NFT scams remain a serious risk to investors in the digital token market. These crimes can result in losses of thousands or even millions of dollars, as NFTs are still relatively new and lack proper security protocols. As a result, investors should exercise caution when investing in this space until further notice.
Scammers are always on the lookout for ways to defraud people of their money, often employing a combination of techniques. One common type of non-factual transfer (NFT) scam involves phishing, where an impostor creates an official-looking website and sends fake email links in an effort to obtain personal information and access to your account.
Another method used by NFT scams is customer support frauds. In these schemes, hackers pose as technical staff of NFT marketplaces and contact buyers through Discord or Telegram in an effort to pressure them into resolving their issues and providing sensitive information.
To protect yourself from NFT scams, it is recommended to activate two-factor authentication. Utilizing physical token generators and device-based authenticator apps can make it simpler to secure your account. Furthermore, moving your NFTs to cold storage or hardware wallets such as Trezor will make them safer from scammers and cybercriminals alike.
Although many NFT investors are aware of the risks involved with investing in these assets, there have been a plethora of new scams targeting NFT buyers. These can include:
One of the most frequent NFT scams is plagiarism. This occurs when an NFT is taken from another artist or copied from a real-world work created by that same artist. OpenSea, one of the leading NFT marketplaces, recently revealed that 80% of NFTs minted with its minting tool were fake or plagiarized from other creators.
To avoid such mistakes, always conduct a reverse image search on any artwork you plan to purchase and ensure it has been released by its artist. Furthermore, verify the user profile of an NFT seller in order to confirm their identity.
NFT collectors should also be wary of offers that appear too good to be true, particularly from new exchange markets with minimal security measures.