With the NFT euphoria, it’s no surprise that scammers are on the hunt for a paycheck. The good news is that knowing the most frequent NFT scams can help you stay a step ahead of fraudsters. Follow along as we explore the most common schemes you need to know about.
Here’s a list of the most common NFTs scams and what you can do to avoid them.
One of the most common NFT schemes is phishing scams, which involve the use of fake websites that ask for 12-word security seed phrases and private wallet keys. There are also malicious pop-ups shared on Discord, Telegram, Twitter, forums and via email. In most cases, the resemblance with legitimate websites is almost perfect. Thus, it will take a keen eye to spot even the smallest differences in the URL or the website layout.
To avoid phishing scams, it is best to check the URL first before clicking. Remember not to give your seed phrases and private wallet keys to anyone outside of your NFT wallets.
Rug pull scams, which got its name from the popular expression “pulling the rug out,” involves fraudulent developers promoting fake NFTs on social media with the goal of convincing more people that the project is real and that they will make more money out of it.
The scammers will hype up a project, attracting more people to invest and then without notice, discontinue the project. This occurs once they have fully drained the investors, withdrawing all funds in an NFT wallet. After which, the scammers delete all their profiles on marketplaces and social media platforms.
You can avoid these NFT scams by doing your research. Look for the NFT collection and see if it has legitimate artists and developers behind it. One way to check their legitimacy is by visiting their website or social media accounts.
Active social engagements and several discussions about their crypto projects are good indications that the project is actually genuine.
Compared to rug and pull scams that involve convincing people that they should invest in fake crypto or NFT projects, pump-and-dump scams involve scammers buying a large number of cryptocurrencies or NFTs to create an artificial sense of an asset being in high demand. With people thinking that the project is highly profitable, they will start placing their money on it as well. Once a price hits a targeted level, the scammers will then sell the NFTs or cryptos, leaving the investors with non-valuable assets.
To avoid falling victim to pump-and-dump crypto schemes, make sure to check the number of transactions as well as the buyer of the project you’re interested in. A considerable number of transactions can be an indication of the date when the scammer pumped the crypto or NFT.
Another most popular tactic is called the bidding scam. These involve a scammer changing the cryptocurrency of their offer to a lower value, say ETH to USD. This will cause your earnings to drop to a lower price.
To avoid bidding scams, double-check the currency used. If a potential buyer negotiates for a lower bid, consider that a red flag.
Scammers may copy or steal artwork and list this plagiarised NFT on legitimate sites such as OpenSea, Soon.Market etc. Since it was copied or stolen, the NFT has no value. Sadly, the victim has already spent funds to purchase the NFT before even realizing it is fake.
Before buying an NFT, look for the seller name, all the information that match the real owner. Also make sure to check when auction ends, as you may see in the fake auction there was a little of time. The real one ends in 3 days 22 hours...
You can also check the authenticity of an NFT by dragging the image of the digital artwork to Google Images. If you find other artists who own the piece, it is more likely that the one you’re about to purchase is fake.
Unfortunately yesterday we have witnessed a real example of scam that happened in the Proton NFT ecosystem, where scammer stole around 700k $XPR. We've asked product leader Marco from Soon.Market to comment the incident.
"When I woke up Friday morning around 7 AM CET I discovered various messages and recognized there have 2 different copies of the original collection been created by a scammer. The scammer launched various auctions with two different accounts. Unfortunately, I woke up too late and some users already placed their bids in two of these auctions. We reacted quickly and put these collections into our blacklist. From that point of time these auctions were not displayed on Soon.Market any longer. As the auction is running decentralized and controlled by the logic written in AtomicMarket contract, there is no possibility to cancel it, meaning that two people in the community lost their money on this auction."
"It was a very sad moment for us and the NFT community. But I am sure we will get out of this stronger than ever! Though it's a high advantage of Proton that new accounts can mint their first NFTs for free, it comes with a huge downside as we can see. Different marketplaces provide easy minting solutions and some of them currently allow minting without any further background check. This, unfortunately, is a heaven for scammers and the worst part is: they do not even have to have any technical knowledge!"
Marco told us about their future plans, how they intend to fight against NFT scams:
"We had plans to introduce a community governed blacklisting & whitelisting already for a long time and applied for a developer grant to implement an application that can be used by Proton NFT Watch to take decisions. In September 2022 this grant has finally been approved and after this wake up signal we will prioritize this topic and prepare our market in that regards - NOW!
I am happy to announce that we will soon introduce hints for the users to educate them before buying an actual NFT which is not on the whitelist. In the beginning, the whitelist will contain only the Proton DEX Keys as well as our own collections ("Soon.Market" & "Power of Soon") and we encourage everybody of the community to join our Discord where we created the #proton-nft-watch channel. Everybody can propose to whitelist a specific collection there and together we will vote and decide if a collection will be whitelisted or not. All collections that are whitelisted will be marked as such on our market and the hint "Watch out for scam" won't be displayed for these collections. Soony, our notification bot on Telegram, will get the same logic and make it clear if a collection is whitelisted or not.
In the future, we aim to further decentralize this approach and the application that supports Proton NFT Watch will kickstart this initiative. I invite everybody in the community to join our Discord. The first draft for the Proton NFT Watch rules how to handle blacklisting and whitelisting will be shared as soon as possible and everybody is invited to provide their opinion. Let's educate and help each other to give scammers no chance - we all know: scammers always gonna scam!
In the upcoming weeks we will organize a Twitter Space to discuss our recent updates and future plans, specifically in regards to whitelisting & blacklisting with the help of Proton NFT Watch - stay tuned and watch out for scam!"