The growth in the popularity and adoption of NFT has led to the birth of NFT scams. The truth is that NFT scams are becoming more sophisticated and many are falling prey. NFTs are undoubtedly appealing on different levels and scammers are also interested in getting their share of the loot.
If you are currently a stakeholder in the world of non-fungible tokens, it is crucial that you keep abreast of scam tactics used by unscrupulous individuals and also stay up to date with the latest safety and security in the industry.
What are the Common NFT Scams and How Do You Avoid Them?
Rise of Fake Marketplaces
The first step in investing in NFTs is to find a marketplace where you can buy or sell NFTs. There are dozens, if not hundreds, of marketplaces available online today. Unfortunately, many of them are established to defraud people. Many fake marketplaces without any legitimate NFTs have been launched.
All they have on their sites are fake NFTs. If you make the mistake of buying NFTs on such sites, you can get scammed through the transaction details you leave on the site. Some of these sites may also ask that you provide your 12-word security seed phrases or private keys.
With this, they can steal your assets from your digital wallets. However, you can avoid this by choosing an online legitimate NFT trading platform for all your crypto transactions. You should also never provide your information in emails, pop-ups, or links.
You would have at least heard of one rug pull incident since you started following NFT projects online. So, what are rug pull scams? When a game platform releases an initial collection of NFTs to start a bigger project with a game element and then runs off after raising millions of dollars before fulfilling any of its promises.
This often happens very fast but there are also cases of slow rug pulls. Slow rug pulls happen when projects gradually get abandoned by developers without providing updates or any new development to engage users. To avoid becoming a victim of rug pull scams, it is important to do your research.
Take the time to investigate the game developer and the team behind the NFT project. Also, review the long-term plans of the project and read what others have to say. Follow the project on different public forums, including Discord and Twitter. An NFT project without a robust community should make you wary.
As mentioned NFT scams are becoming more sophisticated with many scammers impersonating legitimate NFT platforms. Their mode of operation is often to send you fake emails with fake claims that you are a recipient of a free NFT.
Such phishing emails often come with an embedded link that they ask you to click to redirect you to the NFT marketplace. The page where you will land is the fake website where they will ask you to link your digital wallet or submit your seed phrase. With this, they can hack into your wallet and steal your assets.
You can avoid this by always checking and verifying the address of the email sender before you respond. Make sure that the email is from a genuine NFT trading platform that you are signed up with before you interact with the email message.
Pump and Dump NFT Schemes
This is another thing to watch out for to avoid becoming a victim of an NFT scam. Pump and dump NFT refer to a situation where someone buys tons of NFTs simply to drive up the demand and create artificial scarcity. They often do this to make it look like their NFT is popular.
Once it begins to attract investors, they will sell the NFTs at high prices and cash out leaving you with worthless assets. To avoid this, make sure you review the transaction history of any NFT you desire to buy. When you see many transactions on the same date, it may mean a case of a pump and dump scheme.
NFT scams are real. Therefore, you must keep your digital assets safe. According to reports, about $14 billion worth of crypto assets were stolen, which was due to the huge boom in the world of decentralized finance.
It is worth mentioning that this theft came at a time when over $22 billion were invested in NFTs by stakeholders. With more people getting into NFTs, it is crucial to watch out to avoid falling prey to NFT scams.