Scams and fraud have been a global bane for most successful economic activities. From finance to trade and investment, hospitality, aviation, logistics and manufacturing, malicious actors have saturated every financial and economic sector to scam unsuspecting users in those sectors. The digital space has not been spared by these malicious players, who do everything they can to take people’s possessions away from them. Since the advent of blockchain technology, scammers have devised several dubious ways to defraud unsuspecting victims within the crypto space. However, these malicious players know no limit as they have expanded their dubious activities into the NFT space. That’s why we look at the NFT scams to watch out for in 2023.
Types of NFT Scams in the Decentralized Space
1. Phishing Fraud
Phishing scams are fraudulent activities in which malicious actors trick their victims into disclosing sensitive data that can play an important role in violating the security architecture. In the NFT space, it can be deployed by sending dubious website links to victims, where they have to enter personal information. This scam was deployed against CryptoBatz NFT holders a few days after the launch of the CryptoBatz collection in January 2022.
The phishing Discord link was embedded in an old official tweet shared on December 31, 2021, directing users to a fake Discord server where they had to connect their crypto wallet for full verification. Unknowingly, those who followed lost crypto tokens stored in their connected wallets. Similarly, in January 2023, Azuki lost more than $750,000 when an opponent shared a malicious link on his platform.
Another notable similar attack occurred in April 2022 on BAYC’s official Instagram page where nearly $3 million worth of BAYC NFTs were stolen. The compromised Instagram page shared a malicious link, redirecting victims to a dubious airdrop page. Bored Ape NFT holders were required to sign a smart contract transaction from their wallets, giving the adversaries access to the wallets of unsuspecting victims.
2. Bid Scams
You may be wondering how collectors/investors can be scammed trying to sell their NFTs. Well, it’s possible.
How?
A bid fraud is instant and can go undetected if the seller does not double check the bid price for an item before accepting such a bid. For example, a maker/collector can list their NFTs on a marketplace with a bidding option. Since the highest bidder usually gets the item, the scammer will bid the highest to stay above other bidders. Sometimes they offer outrageous bids to convince the seller, such as offering 40 wETH ($69,520) while others offered 5-6 ETH. The scammer with the highest bid will change the crypto token offered to cheat the seller by probably changing the 40wETH to 40USDT or other smaller tokens. Unknowingly, the seller will accept the amended offer without a double check at $40 instead of the original $69,000+.
3. Clone or fake marketplace
NFT marketplaces play an important role in the creation and listing of NFTs. As such, they become an easy hotspot for scammers to trick unsuspecting victims into cloning and hosting reputable marketplaces on nearly identical domains. For example, scammers can clone Blur.io’s user interface and host it on Blur.com; they could clone OpenSea.io and host it on OpenSee.io or OpenSea.com. Due to the similar UI design, unsuspecting victims (collectors and creators) will mistake the clone marketplace for the real thing.
Using cloned marketplaces or NFT related platforms gives hackers/scammers unlimited access to NFTs and Web 3 wallets to sign up. X2Y2 marketplace got involved in this kind of scam through Google ads in May 2022. The reputable NFT marketplace address (https://x2y2.io) was cloned to scam unsuspecting victims, and so was 100 ETH Reportedly stolen before it was discovered.
This scam is not limited to Google ads; scammers can go so far as to clone official Twitter or Instagram pages. One such example is the recent Nakamigos airdrop shared on Twitter on August 7. However, Nakamigos’ official Twitter page had no announcement of such an event. In addition to the conflicting Twitter pages, the official page has a verified icon and the cloned Twitter page has “@NakamlgosNFT” instead of the “@Nakamigos” on the verified page.
Additionally, to lend some degree of legitimacy to the scam, the fake airdrop made its way to a reputable bitcoin website, where it shared an embedded Twitter post on the fake Nakamigos page. This highlights a bold new move by the unwanted impostors and indicates their willingness to invest in paid articles to get their message across.
4. Illegal/Counterfeit NFTs
Scammers can also go so far as to distribute illegal NFTs to unsuspecting victims. This fraudulent act can take on several dimensions, from selling a counterfeit NFT on a reputable marketplace to selling a fake NFT at a lower price on a cloned marketplace. Scammers can also modify duplicate NFTs by changing their attributes or color. Most reputable NFTs or blue-chip NFTs are usually the subject of this NFT scam.
4. Pulling the carpet
Backtracking is a fraudulent act performed by scammers within the decentralized space to lure unsuspecting victims into investing in a project while absconding with the victims’ investments. It is usually done by hypeping a crypto/NFT related project with the help of social media influencers; Once investors buy their project, they disappear with the money, sometimes for a longer period of time.
An NFT carpet can also be deployed by issuing random and non-unique NFTs to investors after promising glamorous tokens. Such is the case with the infamous Iconics carpet draw in 2021, where investors got random emojis instead of the promised 3D figurines.
Another NFT carpet was the Frosties NFT, the first NFT carpet in 2022, costing investors $1.2 million. The creator drew attention to the project for a few hours by taking down the NFT’s Discord server on Jan. 9. The scam was later confirmed when the official Twitter page tweeted, “I’m sorry” before disappearing. Another similar case occurred in October 2021 when “Evolved Apes” NFT was launched. The developer promised that investors would get unique monkeys that would be used to participate in a fighting game and earn crypto rewards. However, the creator vanished with 798 ETH, leaving investors with jpeg Ape images.
How to avoid NFT scams
Avoiding NFT scams doesn’t require complex equations; it just requires thorough research and verification before taking action. Moreover, it also requires double-checking transactions before they are signed to avoid falling victim to phishing attacks or short-term NFT sales. In most cases of NFT fraud, most creators/developers were not reputable actors within the NFT world; they were reportedly anonymous, making it easy for them to scam NFT investors and enthusiasts. Meanwhile, it is safer to use reputable marketplaces and invest in NFTs from reputable brands with a good track record to avoid becoming a victim of a scam.
Scams in the decentralized space aren’t just limited to cryptos; Malicious actors have besieged the NFT landscape to scam unsuspecting victims through various dubious means. The methods of fraud highlighted above are just a few of the ever-expanding ways scammers are scamming their victims within the NFT space. Other scams from NFT investors, collectors and enthusiasts include
- Catfish/imitation: Impersonating officials of reputable brands in the NFT space to access personal information to steal from the victim’s wallet.
- Community hack: Hacking official community platforms such as Telegram, Discord, Twitter and Instagram, to lure victims to fake websites or programs such as fake airdrops.
- Web3 Wallet Hacks: Hack victims’ wallets to steal their NFTs and other crypto assets.
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*All investment/financial opinions expressed by NFT Plazas are the result of the personal research and experience of our site moderators and are for educational purposes only. Individuals are required to fully research each product before making any kind of investment.