Table of contents
- What are NFT scams?
- How do NFT scams work?
- Types of NFT frauds
- 1. Fake NFT influencers
- 2. Crypto rug pulls
- 3. Fake NFT marketplaces
- 4. NFT phishing scam
- 5. NFT bidding scams
- 6. Pump-and-dump cryptocurrency
- 7. Counterfeit NFTs or NFT plagiarism
- 8. NFT Airdrop scams
- 9. Customer support impersonation
- How to identify NFT scams
- How to avoid NFT scams
- How to report NFT scams
Non-fungible tokens, better known as NFTs, are unique crypto tokens representing real-life items. These can include properties, artwork, and much more. “Non-fungible” means the tokens can’t be replaced.
That's unlike Bitcoin, for instance, which can be replaced by the same thing. And maybe that’s why NFTs are such a big deal. NFTs exist in the world of blockchain technology—Ethereum, specifically.
What are NFT scams?
Think about all the fake designer-label items being sold out there, from high-end sneakers to sought-after Louis Vuitton items and even Hermès Birkin bags. NFT scams work similarly. They are, in essence, counterfeits of existing NFT artworks or knock-offs of original artwork created using advanced technology.
NFT scams are types of online scams. According to Elliptic’s 2022 Report on NFTs and Financial Crime, between July 2021 and July 2022, NFT scams amounted to more than $100 million worth of NFTs, and criminals netted an average of $300,000 per scam.
The highest value was reported in May of the same year, with nearly $24 million worth of NFTs being stolen. However, the number could be higher, as not all thefts are reported publicly.
How do NFT scams work?
NFT scammers aim to make money either by selling counterfeit NFTs or stealing NFTs or funds. They may use phishing attacks to get unsuspecting NFT investors to give up their private wallet keys.
To that end, they may present themselves as good Samaritans trying to help you invest your money. Once they get their hands on it, they vanish into thin air in search of their next victim, and you’re left to pick up the pieces alone.
However they go about it, the goal of NFT scams is similar to that of other scams: making money. Whether it’s by selling expensive counterfeit NFTs or stealing NFTs or funds, NFT scammers are motivated by how much they stand to make. NFTs can sell for anywhere between $100 and millions of dollars, which makes it a lucrative business for cybercriminals.
Types of NFT frauds
List of common NFT scam schemes:
- Fake influencers
- Crypto rug pulls
- Fake marketplaces
- NFT phishing scams
- NFT bidding scams
- Pump-and-dump cryptocurrency
- Counterfeit NFTs or NFT plagiarism
- Airdrop scams
- Customer support impersonation scams.
1. Fake NFT influencers
Fake NFT influencers are fraudsters who promote NFT projects or investments by posing as representatives or social media influencers to entice victims to invest their money.
Posing as an official buyer or trader, someone knowledgeable about the project, or a successful business person backing it, makes others trust the legitimacy of the project. This can be a celebrity, a famous influencer, a financial expert, or an expert in digital assets.
For example, in May 2021, YouTuber Jake Paul endorsed digital assets as though he was an expert in this tweet. However, he was among several celebrities sued for misrepresentation in promoting SafeMoon in a 2022 class action lawsuit.
2. Crypto rug pulls
Rug pull scams involve fraudsters publicly promoting and amassing support for an NFT project or investment to collect funds. They pump up the price of the crypto token. Once the price is high enough, the scammers disappear with the money, devaluing the token.
A good example of this is the Frosties NFT sale.
Frosties NFT scam
According to a criminal complaint, Nguyen and Llacuna generated crypto from their community. Once they made approximately $1.1 million in NFTs, they shut down the project’s website, transferred the funds to multiple digital wallets, and made it difficult for investors to get in contact with them. Each of them faces criminal charges like conspiracy to commit wire fraud and conspiracy to commit money laundering, along with 20 years in prison.
But why do these scams work, you may wonder?
There are several reasons why rug pull scams work:
- Scammers may use celebrities and collectors as promoters for the project. This helps build trust among potential investors.
- The more money collected, the more lucrative the investment seems to potential investors.
- Scammers may use charitable causes to pull at victims’ heartstrings and inspire them to purchase tokens. For example, according to BeInCrypto, the Pixel Penguins NFT project reportedly made roughly $117,000 to support a woman battling cancer, but ZachXBT exposed it as a rug-pull scam. The artist behind the project, Hopeexist1, reportedly stole the money and eventually deactivated their Twitter account.
3. Fake NFT marketplaces
Fake NFT marketplaces are malicious websites made to look like NFT marketplaces. Their goal is to steal your money by selling you non-existent or fake NFTs. By the time you realize what has happened, your money is gone.
4. NFT phishing scam
NFT phishing is a scam aimed at stealing your wallet key and gaining access to your NFT account. Hackers send you a fake link that takes you to a malicious site.
These links can be sent via social media, text, or email. They may also use fake ads on legitimate websites to entice you to click through and compromise your NFT account.
- The Ad Blocker blocks online ads before they reach your browser
- The Tracking Blocker prevents scammers from tracking your online behavior and accessing your personal information
- Phishing Protection protects you from malicious websites and phishing attacks.
Here’s how to use Clario AntiSpy’s Safe Browsing tool:
- Download Clario, get a subscription, and set up an account
- Open the app and click Safe Browsing in the sidebar
- If using a Mac, follow the prompts to install the Chrome extension. It works as a built-in tool on Windows.
5. NFT bidding scams
In NFT bidding scams, fraudsters place the highest bid on the EFT you’re selling. However, they secretly change the cryptocurrency to one of lesser value and consequently end up buying your NFT for next to nothing.
Bidding scams happen in the secondary market. The whole point of placing the highest bid on your NFT is to get you to sell it; it’s usually an offer you can’t refuse. But when all is said and done, you end up with no NFT and worthless cryptocurrency.
6. Pump-and-dump cryptocurrency
Similar to rug pulls, pump-and-dump schemes occur when scammers mislead investors into investing in a project to inflate its value, only to defraud them. Once the scammers have reached the ceiling, whatever amount they’re happy with, they sell off the token and pocket the proceeds.
7. Counterfeit NFTs or NFT plagiarism
Do you remember how students back in school got good grades by plagiarizing another person's work, like a poet? That’s how NFT plagiarism works. Scammers use advanced technology to produce counterfeit NFTs that look like the real deal and sell them as the original.
This is why it’s important to research the artist and the platform you’re investing in before buying.
8. NFT Airdrop scams
Airdrop scams, or NFT giveaways, use fake giveaways to get their hands on the funds in your wallet. They typically advertise NFT giveaways on social media; your part is to either sign up for a prize or spread the word.
But when it comes time to claim your prize, the fraudsters ask for your digital wallet’s credentials, so they can send you the promised NFT. However, if you send them that information, they'll clean up your wallet instead.
9. Customer support impersonation
This scam involves a fraudster pretending to be a customer representative for an NFT marketplace. They contact victims via phone, email, or SMS and try to obtain their personal information.
Does this sound familiar?It may be because customer support impersonation scams work similarly to Amazon scams.
A note from our experts
Customer support impersonation is a form of phishing, and you should treat it as such. Never give up your personal information or wallet details to anyone. Likewise, don’t allow anyone to place orders on your behalf.
How to identify NFT scams
Here’s how to spot NFT scams:
- The website contains spelling errors
- You can’t verify the seller or their information
- The NFT has never been sold in the past
- Duplicates of the NFT appear online
- The price of the NFT is too good to be true.
How to avoid NFT scams
Avoid NFT scams using the tips below:
- Do your research about the artist or platform before investing
- Don’t share your seed phrase or password with anyone
- Use a cold-storage wallet for better security
- Use a VPN service to encrypt your NFT activity
- Never click on unknown or suspicious links.
How to report NFT scams
To report NFT scams:
- Email the relevant marketplace’s fraud or customer services department. It’s best to find the relevant email address on the official website. Try to avoid looking up the email on Google to avoid contacting scammers.
- Contact law enforcement or a lawyer about your options.
When reporting an NFT scam, there are several factors that may affect the course of action you must take:
- Sometimes, if you willingly give up your data or money, it may be hard to bring the perpetrator to justice. Some fraudsters take precautionary measures to cover their tracks, often toeing the line very carefully to achieve their desired goals.
- If you do find yourself in a situation similar to the one described above, chances are you aren’t the punks’ only victim. Do your research to find more people they’ve scammed. If more victims are willing to take the scammer on legally, this could strengthen your case. As the old saying goes, “There is always strength in numbers.”
- In addition to dedicated emails, some NFT marketplaces provide built-in tools to report scams and fraudulent activity within their platforms. For example, in addition to a support email (firstname.lastname@example.org), Rarible offers a reporting option next to a listing in the NFT marketplace. All you have to do is click the More (...) button next to the title of the NFT, select the report option, and provide details about the scam.
- Some scams are unethical but not necessarily illegal.
As you can see, it all depends on the specific NFT marketplace you use and the nature of the scam. If you’re unsure about your options, you can always reach out to the relevant support team for more information.
If you’re suspicious that an NFT project may be a scam, research what you can online. Use Google’s reverse image search to look for duplicates of the artwork and compare details.
Social media is also an underrated tool for obtaining information about NFT projects; use it to find out what others have to say about the project you’re looking into and reply to them for more information. In many cases, other people who’ve interacted with the project before you will offer up helpful information to warn others online.
In the same way, many people have wondered is Apple pay safe. Through research, they’ve been able to verify that it is.
NFT scams are common and they’re here to stay—at least for the foreseeable future. If you’re into cryptocurrency and NFT investments, use the tips in our article to learn what NFT scams to watch out for.
More importantly, avoid NFT scams by being attentive, practicing good internet browsing habits, and never giving out your personal information. Use Clario AntiSpy to steer clear of spying threats like malicious ads and phishing websites and, in turn, protect your NFT account.