From Rug Pulls to Giveaways, 10 Most Common NFT Scams and How to Avoid Them

Scams, Ponzi Schemes, Phishing Attacks and More

NFTs or Non-Fungible Tokens took the world by storm upon their introduction. They created a digital space for art and collectibles which was quickly adopted by the masses. The unique digital assets became a hot commodity, with record-breaking sales and high-profile endorsements. However, like all digital entities, even NFTs are not immune to scams and fraudulent activities. Various scams have targeted both new and seasoned collectors. Here are 10 such common NFT scams and how to avoid them.

1. NFT Ponzi Schemes

In NFT Ponzi, early investors are promised high returns based on the investments of new participants, instead of legitimate business activities. The pyramid inevitably collapses when new investors stop joining, resulting in losses for the old investors. These schemes capitalize on the hype and speculative nature of NFT marketing and use aggressive marketing with false promises. To avoid such scams, investors should be wary of projects that promise high returns with no risk. Further, they should always conduct thorough research on the creators of the NFT before investing.

2. Bidding Scams

Bidding NFT scams take place during the auction process of buying and selling NFTs. In this fraudsters manipulate the bidding process to inflate the price of an NFT artificially, using fake accounts. They place high false bids on the NFT creating fake demand. Thus, unsuspecting buyers are tricked into buying the NFT after which the scammers withdraw their bids leaving the victim with a significantly low-valued asset. To avoid the scam, investors must research the bidding history of an NFT and be cautious of auctions where the price seems inflated.

3. Rug pull scams

Rug pull scams are one of the most common frauds in the NFT space. In rug pulls, scammers hype up a new upcoming NFT project, pumping its demand and price. However, once the project accumulates a significant amount, the developers of NFT vanish with the money, abandoning the project. Since these scams are often linked with new projects that lack a track record, investors should be wary of such projects, look at independent reviews, and do proper research.

4. Phishing Scams

In phishing scams, fraudsters use deceptive methods to steal sensitive information like private crypto keys, login credentials, or sensitive financial information. These scams are executed through emails, social media messages, or fake websites that impersonate legitimate NFT platforms. The scammers lure victims to the fake platforms with the promise of exclusive NFT deals or access to rare digital assets. Once the victim enters their information to sign up, the scammers then steal that sensitive information to further steal money or assets. Thus, to avoid phishing scams, it is advised to carry out transactions only from legitimate platforms and refrain from clicking any external links shared by people.

5. NFT airdrop or giveaway scams

These scams take advantage of users’ desire to get free assets. Scammers promote fake airdrops or giveaways of NFTs or cryptocurrencies. However, to participate in the giveaway, users are instructed to perform certain tasks like making a small payment of cryptocurrencies, sharing private keys, or filling up a form with personal information. Once the victim shares the information in hopes of free perks, the scammers disappear without delivering on their promise. To avoid these scams, investors need to avoid schemes that are simply too good to be true, and the schemes which require upfront payment or sensitive information.

6. NFT website scams

Website scams are similar to phishing scams where fake websites act as NFT marketplaces or projects. These websites offer the sale of fake NFTs or pretend to offer services related to NFT trading. However, the money used to make transactions on these websites is often lost and victims easily fall for the scams as these websites appear highly credible and professional. To avoid falling for website scams, investors must verify the URL of the website and look for signs of legitimacy, such as secure connections (HTTPS) connection, reviews from trusted sources, and verified contact information.

7. Plagiarized or Fake NFTs

Plagiarized fake NFT scams are another common scam that involve NFTs that are unauthorized copies of existing digital artworks. Scammers may also create entirely fake NFTs, promoting them as valuable or rare digital assets. These scams also exploit the NFT hype, especially over digital art, and take advantage of new investors who lack knowledge. To avoid such scams, investors should thoroughly research the creator’s background. Even though platforms and marketplaces vet their creators and artworks, buyers still must perform their due diligence before purchasing any NFT.

8. Pump and dump scams

In pump and dump scams, fraudsters artificially drive up the demand up for an NFT driving its price higher. A group of scammers may work together to pump and increase the price of NFTs so that new investors join in on the trend thinking that it is a valuable asset. Once the price goes high enough, the scammers dump their whole assets making a good profit, and crashing the price down at the same time. Thus, when investors come across an NFT price surge, they should check the history of the asset and wallet record of the collection to check its legitimacy.

9. Technical or customer support NFT scams

Technical or customer support frauds take place when scammers find NFT holders’ contact details through Discord, Telegram, or Reddit to reach out to them using fake identities. They create identities through legitimate-looking websites and pose as technical staff of the marketplaces. They often persuade users into new schemes and sometimes pretend to resolve issues and ask for sensitive information from victims to help them. In this way, they collect digital collectible credentials and sensitive data to steal their assets. Investors should note that legitimate customer support agents will not reach out to community members via social media. Thus, people should never share sensitive information through social media and contact the official team.

10. Stealth drop NFT scams

Social media platforms like Twitter have become a great channel for carrying out these NFT scams. As investors participate in NFT conversations, the platform recommends more similar content capitalizing on this. Scammers create a stealth drop NFT, which promises quick riches by providing exclusive access to rare NFTS. However, in reality, the victims are lured into a rug pull scam where they end up losing their funds. Investors should avoid any closed/invitation-only Discord Channels shared by the stealth droppers.