Common NFT Scams & How To Avoid Them (Examples & Tips)

The rise of NFTs (Non-Fungible Tokens) has brought new opportunities for digital ownership, creativity, and investment.

However, the rapid growth of the NFT market has also attracted scammers looking to exploit unsuspecting users. From phishing attacks to counterfeit NFTs, scams are becoming more sophisticated and prevalent.

This article explores the most common NFT scams and provides actionable steps to avoid them, ensuring that you can safely navigate the world of NFTs.

Understanding NFT Scams

NFT scams are fraudulent activities designed to deceive individuals into losing their digital assets or money. As of 2024, the global losses from NFT scams have surpassed $100 million, highlighting the scale and impact of these threats.

Scammers use various tactics, such as social engineering, malware, and fake marketplaces, to trick users into revealing sensitive information or transferring assets.

Key Statistics on NFT Scams:

• $100 million+ in total losses due to NFT scams in 2023.
  
  
• Over 50% of NFT scams involve phishing attacks targeting wallet information.
  
  
• 30% of reported scams involve fake or counterfeit NFTs.
  
  
• 20% of scams are related to compromised marketplaces or fake listings.

By understanding the most common types of NFT scams and how they operate, you can better protect yourself from becoming a victim.

1. Phishing Scams

Phishing scams are one of the most prevalent types of NFT fraud. Scammers impersonate legitimate platforms, marketplaces, or wallet providers to steal users’ private keys, seed phrases, or login credentials.

These attacks are often carried out through fake websites, emails, or social media messages.

Example: A scammer might send an email that looks like it’s from a popular NFT marketplace, asking you to verify your wallet by entering your private key.

Once you provide this information, the scammer can gain full access to your wallet and steal your assets.

How to Avoid Phishing Scams:

• Double-Check URLs: Always check the URL of the website you are visiting. Scammers often create URLs that look similar to legitimate ones.
  
  
• Use Official Channels: Only use official apps, websites, or communication channels to access your NFT marketplaces or wallets.
  
  
• Enable Two-Factor Authentication (2FA): This adds an extra layer of security, making it harder for scammers to access your accounts even if they have your password.
  
  
• Never Share Your Private Key or Seed Phrase: No legitimate platform will ever ask for your private key or seed phrase.
  
  

2. Fake or Counterfeit NFTs

Fake or counterfeit NFTs are fraudulent tokens that scammers create and sell, claiming they are genuine. These scams can be particularly difficult to spot because they often involve impersonating well-known artists or brands.

Example: A scammer might create a collection of NFTs that look identical to a popular artist’s work and sell them on a lesser-known marketplace at lower prices.

Buyers think they are getting a good deal, only to discover they have purchased worthless, unauthorized NFTs.

How to Avoid Fake NFTs:

• Verify the Seller: Check the seller’s profile and look for verified badges or indicators on reputable marketplaces like OpenSea or Rarible.
  
  
• Research the Collection: Investigate the NFT collection’s history, including its creation date, transaction history, and social media presence.
  
  
• Check for Red Flags: Be cautious of sellers offering NFTs at prices significantly lower than their market value. Always ask why the price is unusually low.
  
  
• Use Reputable Marketplaces: Stick to well-known NFT marketplaces that have verification processes in place to help identify legitimate creators.
  
  

3. Rug Pulls

Rug pulls are a type of exit scam where a project is launched, and then the creators suddenly disappear with the investors’ money.

These scams are prevalent in the world of NFT collections and new projects, particularly those that promise high returns or exclusive benefits.

Example: A new NFT collection is launched with a lot of hype and social media promotion. Investors buy into the collection, hoping for future value appreciation. Suddenly, the creators delete the website, social media accounts, and disappear, leaving the investors with worthless tokens.

How to Avoid Rug Pulls:

• Research the Team: Look into the background of the project’s creators and developers. If they are anonymous or lack a verifiable track record, exercise caution.
  
  
• Read the Whitepaper and Roadmap: A legitimate project will have a detailed whitepaper and a clear roadmap outlining its goals and development plans.
  
  
• Check for Smart Contract Audits: Legitimate projects often undergo third-party audits to verify the security and reliability of their smart contracts.
  
  
• Be Skeptical of Unrealistic Promises: If a project promises extremely high returns or guaranteed profits, it’s likely too good to be true.
  
  

4. Pump and Dump Schemes

Pump and dump schemes involve artificially inflating the price of an NFT or collection through misleading information or coordinated buying.

Once the price reaches a peak, the scammers sell off their holdings, leaving unsuspecting investors with devalued assets.

Example: A group of scammers promotes a low-value NFT collection, creating hype and artificially driving up the price through coordinated buying. Once the price peaks, the scammers sell off their NFTs, causing the price to crash and leaving other investors with losses.

How to Avoid Pump and Dump Schemes:

• Avoid FOMO (Fear of Missing Out): Don’t rush into buying an NFT based on hype alone. Conduct your research and due diligence.
  
  
• Look for Transparent Trading Volume: Genuine collections will have steady and organic trading volumes. Be wary of sudden spikes in activity.
  
  
• Monitor Social Media Channels: Be cautious of projects heavily promoted by influencers or groups with little transparency or accountability.
  
  

5. Impersonation Scams

Impersonation scams involve scammers pretending to be well-known figures, artists, or brands to deceive buyers into purchasing fake NFTs or providing sensitive information.

Example: Scammers create fake social media profiles impersonating popular NFT creators and announce a limited-time NFT drop.

Unsuspecting users, thinking they are interacting with the real person, send payments or provide private keys.

How to Avoid Impersonation Scams:

• Verify Social Media Accounts: Look for verification badges on platforms like Twitter, Instagram, and Discord.
  
  
• Cross-Check Announcements: Always cross-check any NFT drop or sale announcement with official websites or channels.
  
  
• Report Suspicious Accounts: If you encounter a suspicious account or message, report it to the platform and warn others in the community.
  
  

How to Protect Yourself from NFT Scams

1. Use Secure Wallets and Keep Your Private Key Safe:Always use reputable wallets, such as MetaMask, Trust Wallet, or Coinbase Wallet, which offer robust security features. Never share your private key or seed phrase, and store them securely offline.
   
   Consider using hardware wallets like Ledger or Trezor for added security, as they store your assets offline and reduce the risk of online attacks.
   
   
2. Enable Two-Factor Authentication (2FA):Set up 2FA on all accounts related to your NFT transactions, including wallets, email, and marketplace profiles. This step adds an extra layer of security, making it more difficult for scammers to access your accounts even if they have your password.
   
   
3. Stay Updated on Common Scams:Regularly read updates from trusted sources about the latest NFT scams. Joining NFT communities, following reputable news outlets, and subscribing to security blogs can help you stay informed.
   
   
4. Only Use Reputable Marketplaces:Stick to well-established NFT marketplaces like OpenSea, Rarible, and Foundation that have stringent security protocols and verification processes in place. Avoid dealing on lesser-known platforms without a proven track record.
   
   
5. Verify Smart Contracts:Before purchasing an NFT, check the smart contract details. Verify that the contract is from a reputable source and has undergone audits from third-party firms. Websites like Etherscan can provide contract addresses and transaction histories.
   
   
6. Be Skeptical of Unsolicited Offers:Be cautious of unsolicited offers, whether they come via email, social media, or private messages. Scammers often use direct messages to lure victims with fake offers or exclusive deals.
   
   
7. Use Browser Security Tools:Install browser extensions like MetaMask’s phishing detector or use a secure browser like Brave to help identify potentially malicious sites.
   
   

FAQs About NFT Scams