Common NFT Scams and How To Avoid Them
Last Updated on January 9, 2023 by Kevin Groves
In this article, we’ll go over the most common NFT scams, how investors lost their money and how you can prevent that from happening to you.
If you’ve been hearing about NFTs and cryptos all over the Internet and want to invest in them, you might want to consider the risks.
Being scammed is always a possibility, and you should keep an eye on potential frauds.
What Are NFTs?
An NFT, or non-fungible token, is a one-of-a-kind piece of data that uses technology to log and validate digital content-from films to songs to images-on cryptocurrency blockchains, primarily Ethereum.
The most significant impact of NFTs is that they make it simple to own and sell digital content.
Long story short, they mostly consist of digital art linked to the blockchain. The blockchain is a method of storing data so that it is difficult or impossible to alter, hack, or cheat it.
That means no one can fake their ownership, making it a great way of selling and buying digital crafts. An NFT can be one-of-a-kinds, such as a real-life painting, or one of many copies, such as trading cards, but the blockchain always keeps track of who owns the file.
If you’re wondering why people buy ownership of links or videos, here’s the answer:
As minting companies point out, owning digital material may be a financial or sentimental investment, a way for collectors and creators to connect. The NFT is the creator’s autograph on the content, similar to an autograph on a baseball card, making it rare, unique, and precious.
Have you ever seen someone collect cards or stamps? It’s the same concept. People buy NFTs for sentimental reasons or to generate money.
Common NFT Scams
From impersonating other people to getting buyers’ personal information, NFT scams are everywhere. Since they are digital and new, it is relatively easy to trick people and profit from the work of others.
Even the most popular NFT minting/trading site, OpenSea, recently revealed that over 80% of the freely minted NFTs on their site are fraud and scams. Naturally, they took up the fight against those practices but it’s a tough one.
Below are some of the most common frauds and how to avoid NFT scams.
1. Illegal and Copyrighted NFTs
While the NFT investment gold rush has made some artists millions, it also appears to have attracted scammers eager to profit from other people’s hard work.
Several artists worldwide noticed that their work was stolen and sold on NFT sites without their permission or knowledge. Some of these artists only found out weeks or even years later, after stumbling across their art on an auction site.
As a result, they’ve begun sharing block lists to prevent automated accounts from making unauthorized NFTs of social media work. Others have decided to lock their accounts so only current followers can see their updates.
The case of Weird Undead
Let’s take a look at the case of a Russian artist named Weird Undead. An automated NFT tweet-minting bot known as @tokenizedtweets is at the centre of several theft reports.
@tokenizedtweets generates NFTs of tweets without notifying the tweet’s owner. To make a tweet into an NFT, a Twitter user merely has to mention the bot below the tweet.
When someone creates or “mints” an NFT, the token they generate is permanently linked to an existing unique digital or physical entity. It can be anything from a physical pair of shoes to a URL or video.
When someone purchases an NFT for digital artwork, they’re buying the token that symbolizes said artwork rather than the craft itself. It may be confusing, but that’s why companies like @tokenizedtweets exist.
Weird Undead became suspicious of theft when a user mentioned @tokenizedtweets beneath one tweet featuring her most recent artwork. She looked into it further and discovered that her tweet (which included the painting) was up for auction on OpenSea, one of the largest NFT marketplaces.
The coin vanished from the auction platform when she filed legal notices with OpenSea, charging “insane and senseless copyright violation.”
The only barrier left to theft is that scammers don’t gain as much for an NFT that hasn’t been authenticated by the artist.
How To Avoid Getting Scammed:
Hopefully, after reading this, you will keep an eye on copyrighted and stolen work and NFTs before buying one.
To make sure you don’t get scammed, use Reverse Image Search. A reverse image search is a feature that allows you to look for related or duplicate images on the Internet.
If the reverse-search history results show several copies of the requested piece, it’s a significant red flag that the artwork is illegitimate and potentially stolen.
2. Discord Scams
Due to a recent rash of scammers on Discord, NFT owners are becoming extra cautious about who they communicate with.
Many projects in the crypto sector use Discord chat servers to communicate with their communities. However, owners have become increasingly suspicious as scammers have attempted to defraud them of their valuable tokens by using the popular messaging software Discord.
Scammers impersonate top NFT Discord moderators and deceive people into visiting a phony website and entering their wallet information and seed phrases to steal their wallets.
A seed phrase is a string of words generated by your bitcoin wallet and used to gain access to the crypto linked with it.
How People Can Get Scammed on Discord
This deception works through webhooks. A webhook is, to put it simply, an automatic communication system between apps. Webhooks provide a simple solution for exchanging data between web applications or a website and those applications. Here’s how frauds leverage it:
- The scammer selects a victim from the server members.
- The scammer logs onto the server the victim is.
- The scammer impersonates the target and gets them banned.
- Then the scammer poses as the moderator and contacts the banned victim.
- The scammer asks the victim to prove their innocence and identity by filling out a form or registering on a website.
- The victim believes the scammer is the moderator, a legitimate figure, and enters personal data, which is then used against them.
Another common Discord scam is even simpler:
The scammer reaches out to new members who asked a question on a server. They will pretend to be a mod and that they are going to help them.
After some questions, they will share a link to a website on which the victim will be tricked into entering their wallet details and the scammer will steal everything that’s on that wallet.
How To Avoid Getting Scammed
There are other Discord scams, as the method varies depending on the attacker.
Be that as it may, always be cautious about who you talk to and with whom you reveal your personal information.
When a supposed mod or Discord official reaches out to you, just check which servers you have in common with that person. Then check their roles on that server. If they don’t have a special role like “mod” or something similar, you can be pretty sure that they are trying to scam you.
Simply reach out to a real mod then and report that person. They will be banned in no time!
Regarding the links, be very careful which ones you click. Make sure a hundred times that they are genuine and not suspicious.
3. Artist Impersonators
This section is similar to the case of Weird Undead. Instead of selling digital content from the artist, they impersonate the artist directly.
These scammers are out to steal the hard work of others and sell it under their name. The online profiles can appear legit at first glance, making them difficult to detect.
It happened to Derek Laufman, a digital artist. He woke up one day to tons of messages on social networks asking if he had begun to mint and sell his artwork on Rarible, a website to create and buy NFTs. It turns out that he hadn’t.
Did you know this happened even with a dead artist?
Qing Han was an artist that illustrated popular anime characters, gaining millions of followers on social media. Unfortunately, she got diagnosed with cancer and lost the battle.
Only a year after Qing Han died, someone informed her brother that someone had stolen her identity and was selling non-fungible tokens of her artwork.
How To Avoid Getting Scammed
Always remember to double-check the profile’s legitimacy, no matter how genuine it appears to be. You can ask the artist directly, like Laufman’s followers did. Or you can check their social platforms for mentions of NFT and auctions – if there aren’t any, it’s probably identity theft.
It is relatively easy to profit from someone else’s work through these tokens, making it particularly critical to be aware of these risks.
4. Bidding Scams
Bidding scams usually occur after you’ve purchased your NFT and wish to resell it to the highest bidder on the secondary market. Imagine you have an NFT that cost you $5,000, and now you want to resell it for a profit.
When you put NFTs up for sale on a betting site, one bettor may change the cryptocurrency without your knowledge.
Let’s say you want to sell the craft for 3.5 ETH, which is equivalent to about $10,000. And suddenly you see that someone offers you 5, which equals about $14,000. You probably want to sell it immediately, which leads to not noticing the type of cryptocurrency they are using.
For example, imagine that person bet 5 USDT and not 5 ETH. Well, I regret to inform you that you’d be only receiving 5 dollars for your NFT.
How To Avoid Getting Scammed
To avoid these scams, you should always double-check what currency is being used and never accept a lower bid than your initial idea.
Summary And Final Tips
You have decided to enter the world of non-fungible tokens. You want to invest in them or buy some for sentimental reasons, but you are afraid of fraud. The reality is that NFT scams are more frequent than it seems, and you should have all your senses alert. Below are some of our top tips to safely purchase tokens:
- Always check that the seller is legitimate. If it’s a well-known artist or social networker, check that they talk about selling their tokens – if they don’t, it’s a network flag.
- Beware of Discord servers and their “moderators” or anyone asking you to check personal data. Never share personal or wallet information with strangers.
- Beware of auctions and the cryptocurrency used. Buyers may offer you a high amount of a cryptocurrency that is worthless.
- Remember that buying an NFT does not mean that you own the object or the craft itself, but its representation.
Now that you know how to avoid these common NFT scams, you can learn more about NFTs and how to buy them.
Warren is the co-founder of CoinCryption. He has a passion for cryptocurrency and has been involved in this space for more than 7 years. His other love is digital marketing and has over 15 years of experience.