To mitigate the possibility of being scammed, always choose a legitimate NFT exchange such as Binance NFT.
Keep your wallet credentials safe and be sure to verify the link and sender email address before clicking.
In this article, we’ll cover the most common NFT scams and share how to avoid them.
As NFT scams become more sophisticated, it is easier than ever for anyone to fall into this trap. In this article, we’ll focus on NFT scams so that you don’t lose your digital collectibles before making a profit.
NFTs have taken the world by storm, upending the art world and other industries. While cryptocurrency enthusiasts see this as an exciting sign that cryptocurrency adoption is starting to catch on, it can be difficult to discern who are the trusted creators and who are the bad actors in this new space.
The growing mainstream interest in NFTs has exposed many popular NFT project communities to phishing attacks. This has sparked active discussions about the best protection options for NFT assets.
Since the NFT field is still nascent, it is important to stay up to date on common scam tactics and the latest NFT security safeguards.
Read on to learn more about how to spot red flags and keep NFTs safe.
NFTs are attractive to many, including scammers
With the significant growth of NFT use cases, these digital assets will lead us into a new era of the digital world. The potential of NFTs has piqued the interest of many, including tech giants and celebrities.
However, as the NFT space can still be considered to be in the initial coin offering (ICO) stage, the framework it has built is vulnerable to bad actors looking to exploit new trends and emerging technologies.
But what gives NFT value? A photo can sell for five or six figures, and it looks like a lot of money, but the value of NFTs lies in their utility and uniqueness. NFTs essentially create a permanent digital record of exclusive ownership on the blockchain and ensure authenticity.
For some, owning a digitally tokenized piece of art can act as a ticket to exclusive online communities, chat rooms and interactive experiences.
However, there are some common scams you should be aware of:
7 Most Common NFT Scams
1. False market
If you are thinking of starting to invest in NFTs, the first thing to do is to find a platform where you can buy and sell NFTs. A quick Google search will give you millions of results, but unfortunately, there are many fake NFT marketplaces among them. These fake sites do not have a legitimate NFT, so once the NFT is purchased, the site will record your credentials from your transaction details. Additionally, these sites may even ask for your private key or a 12-word security mnemonic phrase and use it to drain all the assets in your digital wallet.
To avoid these scams, always choose a legitimate NFT exchange such as the Binance NFT marketplace for cryptocurrency transactions and never enter your information in links, pop-ups or emails.
Usually, you only need to use a mnemonic phrase when creating a hardware backup of a crypto wallet or restoring a wallet.
2. False offer
NFT scammers often impersonate legitimate NFT exchanges and send you fake emails claiming that someone has made an offer for your NFT. These phishing emails are designed to get you to follow embedded links and take you to fake NFT marketplaces.
Like all other phishing scams, the button directs you to a fake page that asks you to link a digital wallet and submit a mnemonic phrase, allowing bad actors to hack into your wallet.
To avoid such NFT scams, be sure to check and verify the sender address of any emails you receive from NFT trading platforms.
3. Fake tech support
Fake customer service reps or tech support messages are another common scam. For example, let’s say you’re having technical difficulties on a popular NFT marketplace and ask for help on a public forum like Discord. Then, at this point, someone will generate himself as an agent for that marketplace and can help you.
Agents offering fake support may ask you to share your live feed by sharing your screen, allowing you to inadvertently reveal your cryptocurrency wallet credentials.
Once you agree to do so, they will take a screenshot of the mnemonic phrase or QR code linking to it. Fraudsters can also redirect you to websites that look nearly identical to the original. Then, you will be persuaded to enter personal information, such as a mnemonic phrase. This way your digital wallet can be easily stolen.
How to avoid these types of frauds and keep NFTs safe? Be sure to seek help only through the official NFT marketplace and double-check the site domain name. Some fraudsters may send false security alerts about accounts or NFT collectibles, but the tactics are similar. Don’t click on anything until you’ve verified its legitimacy.
4. Fake giveaways
Fraudsters will impersonate employees from popular NFT exchanges, contact you via social media, and ask you to join their NFT giveaways. They may promise you that you can get NFTs for free just by spreading the giveaway and registering an account on their website (a phishing site).
And once they successfully get you to link your digital wallet credentials to receive your prize, they will log what you enter, gain access to your account, and potentially steal your non-fungible tokens (NFTs).
To avoid falling into this type of NFT scam, make sure you check out the person’s social media accounts and double-check that the link you receive from them matches the company’s legitimate domain name.
5. Runaway scam
A runaway scam is when a person or group of people initially release a set of NFT collectibles as a way to start a larger project that is planned to unfold over time by way of game components, merchandise, or events. And then they run away with the millions raised before they have done any of the actions they promised, which is a runaway scam. In many cases, the scam will happen overnight, but in other cases it will be gradual, and you will find that the project is gradually abandoned, no longer updated, and nothing new.
The best way to avoid falling into a runaway scam is to do your research. Investigate the team behind the project and evaluate their long-term business plan.
Follow the project on Twitter, Discord or other public forums, as an NFT project to have good liquidity or lasting artistic value should have a fairly active investor community.
6. Counterfeit Non-Fungible Tokens (NFTs)
Minting a digital file into an NFT does not create new intellectual property, nor does it give you ownership of the digital file. Instead, it’s just converting digital files into something that can be stored on the blockchain.
Scammers can easily steal the work of digital creators and open an account on the NFT marketplace to put the counterfeit work up for auction.
If you buy a fake NFT, once the community realizes that this is not a real deal, it will make your NFT worthless and make your money impossible to get back.
How to avoid this scam? Before bidding on an NFT, please check that the seller’s profile on Discord or social media is checked for Verified to make it more credible.
Also, instead of searching for favorites directly on the NFT marketplace, use the official links from the creator’s social media accounts and bookmark the page to avoid phishing. If you don’t do your own due diligence, you can fall into many potential pitfalls, and a simple web search can reveal many warning cases.
7. The pump-and-dump scam
Pump-and-sell scams also need attention.
In this case, the term refers to a person or group actively buying large quantities of NFTs, artificially driving up demand.
They will operate in an extremely short period of time, making NFTs look popular. Once the NFT gets noticed, they cash out when the sale price reaches an amount they are happy with. This will make the buyer with the highest bid the winner, and the asset will become worthless in an instant.
Still, be sure to check the transaction history of the NFT you’re buying. If you see several transactions taking place around the same date, this may indicate a pump-and-sell scam.
How to protect yourself from NFT scams?
We’ve covered some of the more common NFT scams, and here are five tips for securing online NFT collectibles.
- Don’t click blindly:
- Never click on links or attachments from unknown sources. When it comes to asking for help with some problems with the NFT platform, be sure to ask for help from the official customer service on the official NFT trading website, not people who contact you through other platforms such as social media.
- Do your research on an NFT project:
- Before investing in an NFT, carefully review the project’s website, roadmap, social media channels, and creator’s bio to assess the long-term value of your investment.
- Check the contact address:
- The address will state where the NFT is minted. If you are not sure, please check the creator’s website to ensure the authenticity of the information.
- Use your wallet credentials wisely:
- Store your seed phrase in a safe place and don’t share it with anyone or keep a photo of it on your phone. Additionally, use strong passwords and enable two-factor authentication (2FA) to enhance the security of your account.
- Use legitimate wallet apps and browser extensions:
- There are plenty of malicious apps that impersonate official apps. Download your wallet app or browser extension from a legitimate official website to avoid being phished.
While the technology behind NFTs clearly has the potential to revolutionize the digital world, the NFT space is still in its infancy. There’s often a lot of hype in this space, making it difficult to determine who are the trusted creators and who are the bad actors. Therefore, always be vigilant and always do your own research (DYOR) before investing in digital assets.
Now that you’ve got the essentials of keeping your NFT collection and wallet safe, are you ready to immerse yourself in the world of NFTs?
Check out various NFTs on Binance’s secondary market. To stay up to date on all things NFTs and to be notified of the weekly IGO launches and exclusive Blind Box releases, follow Binance on Twitter and Telegram.