As the NFT market continues to grow, scammers are also finding new ways to rob innocent investors. Recent data shows over $30 billion has been lost to bad actors in the NFT space since January 2021. However, this should not stop you from owning your first digital art piece. In this article, we will expose some of the common NFT scams and how to identify them and protect yourself.
Five NFT Scams
NFT Pump and Dump
This type of NFT scam is the most common. It involves creators of a particular NFT project artificially pumping the price of their NFTs to attract people to invest in the project. Unfornatutely, these fake creators sell their NFT holdings when prices are up, leaving other holders with no liquidity. This means they won’t be able to convert their NFTs to any known cryptocurrency, making the digital art pieces worthless.
How do you protect yourself from falling victim to such a scam? First, you should look at the NFT project’s wallet record on the marketplaces it is listed. If only a few wallets hold the NFTs of the collection, then proceed with caution. That’s because the creators could be the only holders transacting with each other to raise prices.
In addition, check the project’s social media pages to make sure it has a solid community behind it.
Plagiarized NFTs
In recent months, cases of NFT theft have increased significantly. Bad actors are copying the work of genuine NFT creators and then offering those digital collectibles to investors who unknowingly think they are buying the original NFTs.
These unfortunate incidents have led to the creation of DeviantArt, an online NFT community with more than 50 million members. DeviantArt has built a tool that scans multiple blockchains to alert members of potential fake NFT projects. Since the start of 2023, over 1,000 alerts warning members of dubious NFT collections have been sent.
That said, before purchasing an NFT in a marketplace like OpenSea, check if the creator’s account is verified. You risk losing your funds permanently by buying NFTs from unverified accounts.
Phishing Scams
To trade NFTs, you must connect your crypto wallet to a marketplace. This gives scammers an opportunity to launch phishing attacks, which can involve fake pop-ups requesting you to provide your wallet keys or the security phrase. In case you give such information, the scammers may drain your wallet within minutes.
To avoid losing money through such a scam, it is advisable to refrain from sharing personal information. Also, keep in mind that no genuine crypto player will ever ask you to provide your wallet keys. Lastly, do not click on any pop-ups.
Fake Celebrity Endorsements
The growth of the NFT market has led creators to partner with celebrities to promote their projects. However, not all celeb-endorsed NFTs are legit. In fact, some celebrities are not even aware that their brands are being used to push projects. For example, two years ago, a scammer released an NFT collection dubbed Trollz, named after the popular song of US rapper 6ix9ine. The creator behind the project claimed they had collaborated with the rapper to build the NFT collection. Holders were promised 5% of the song’s royalties, but that was not actualized. By the time 6ix9ine announced that he was unaware of such a project, holders had already lost more than $1 million.
To avoid this type of scam, research the project and ensure that the celebrity involved is actually aware of the NFT collection. You can confirm this by checking if they are posting about the project on their social media accounts.
Technical Support Scam
This scam involves a lousy actor pretending to be part of the customer support team of a particular project. Their goal is to obtain your personal data and then drain your wallet. This scam is usually executed on Twitter, Telegram, and Discord. For your safety, do not provide any sensitive information. In addition, always seek help from the project’s official social media accounts.
Conclusion
The NFT space provides several opportunities to profit. However, be aware that scammers will always exist. So before investing in any project, please do your due diligence to ascertain its legitimacy.
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