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NFT Scams

August 14, 2022

Learn what are the main NFT scams, NFT art fraud and how to stay safe and avoid NFT scams

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NFT scams - how to avoid them and stay safe

NFTs are a new and exciting technology, but like any new innovation, there are also bad actors looking to take advantage of people who are new to this field. NFTs provide a proof of ownership over digitel assets that is impossible to fake, but unfortunately there are other NFT scams out there. Read on to learn how to avoid NFT fraud and scams and keep your assets safe

NFT Scams

Because faking ownership over NFTs is actually more difficult than real physical assets, the main type of NFT scam is to gain access to an unsuspecting user’s digital wallet, and then transfer items and cryptocurrency from that wallet and thus steal your assets. Fortunately there are a couple simple precautions that you can take to avoid most of these NFT frauds and scams.

Seed phrase NFT scam

One of the NFT scams out there is a website disguised as the official site of a digital wallet, asking for your seed phrase.

A quick recap - whenever you set up a digital wallet, you receive a 12 word seed phrase that is your backup for reinstalling your wallet if you forget your password or are installing the wallet on a new computer.

Never reveal your seed phrase to anyone! Your seed phrase is access to your wallet and your assets. So for example the official site of the metamask digital wallet is metamask.io. Some people have received a message from them asking for their seed phrase. Only this was from Metamask.com, not Metamasek.io. These were hackers disguised as Metamask, who then proceeded to access these unsuspecting user’s wallets.

How to avoid this NFT scam

  • Never hand out your seed phrase to anyone, even “official websites”
  • Make sure you are on the correct website. It’s recommended to add frequently used websites to favorites to make sure you don’t accidentally type in the wrong site
  • Write your seed phrase down on paper, not on your computer or google drive. This way no hackers will be able to access it.

NFT and crypto scams asking to connect to your wallet

Another NFT scam out there are websites asking to connect to your digital wallet. So for instance you may have found what looks like a new NFT marketplace, a website with analytics tools, or maybe what looks like the official page of a collection you own or want to mint. These pages will then ask you to connect your wallet in order to perform specific functions. It should be noted that safe websites, such as marketplaces like OpenSea or Magic Eden, also require you to connect your wallet in order to buy and sell, so this seems like a natural thing to do.

Once you have connected your wallet to a website, they can potentially access your wallet and transfer your NFTs and cryptocurrency. Sometimes your wallet extension on your PC may even pop up automatically asking to connect to one of these sites. If you do, you may lose your assets

How to avoid this NFT scam:

  • Only connect your wallet to addresses you trust. Add those websites to your favorites to make sure you don’t accidentally type in the wrong address
  • Only connect your wallet when you are performing a transaction, the rest of the time you don’t need to be connected. Most digital wallets have a “connected sites” tab on their preferences. Use this to see what sites you are connected to at any time and disconnect  when you are not using them. You can even turn off the extension to your digital wallet when you are not using it.
  • Only open links from officials pages like official twitter accounts or announcement pages on Discord

NFT Fraud by personal messages

Most NFT projects have a discord channel, where community members interact. You may receive a personal message from the channel with a link to something related to the project: an early mint, a giveaway with prizes, or anything else. Don’t open this! It is usually a scammer pretending to represent the NFT project you are interested in.

Most NFT projects don’t communicate by personal messages because of the NFT scam potential. Youtube channels with populars youtubers also sometimes have users with a similar name and the same picture replying on their page offering free stuff, beware of these as well

How to avoid this NFT scam:

  • Never open personal messages on Discord, Instagram or any other platform. Reputable NFT projects do not use this method. All the links to relevant pages related to these projects are usually available on an official page. 
  • Don’t respond to links in the replies of Youtube, Instagram, twitter or anywhere else. Only respond to the links on official pages.
  • If you happen to enter a link you are not sure about, don’t connect your wallet to that page until you are double sure it is not a scam. Then check yet again for a third time. You can never be too careful.

NFT rugpull scam

Some people wouldn't categorize this as a scam but rather something to be avoided. A rugpull is a project that creates a lot of hype early on to convince investors to mint a collection, and once the team have pocketed that money they then proceed to “pull the rug” and abandon all investment in that collection.

Some rugpulls are ugly scams: the team just disappears after they pocket the money. While some, what are called “slow rugpulls” are not necessarily scams per se. It could be a team that just doesn’t have a plan on how to advance their collection after the mint. So they just don’t really invest in the project. They may not disappear, and still be available on platforms like Twitter and discord once in a while, but not nearly invested enough in their project for it to take off. These collections always experience a slow decline until their value just evaporates and are therefore a waste of your investment. 

How to avoid this scam:

  • See if the creators of the NFT collection reveal their identity, what’s called “doxed” in the NFT world. Anonymous teams are far more risky, as they don’t have a reputation to uphold and can just run away and start a new short term project. If the team reveal their identity they have their reputation on the line so this is a good sign
  • Check community engagement. Projects with a lively community shows that the hype is not just created through a facebook advertising campaign but is real
  • Check social networks. A lot of collections use bots to create a twitter account with 50,000 followers and lots of engagement, but these are fake accounts. Use online tools that verify if social media engagement is real or not.

NFT art fraud

With some NFTs selling for hundreds of thousands of dollars, it’s not surprising some people try to fake them. So a person will take a screenshot of a Cryptopunk NFT, and then sell it under a “Cryptopunk” collection somewhere. The picture is identical, so some people may fall for this

How to avoid this NFT scam:

When you see an NFT from a famous collection, click on the collection page. You should immediately see if it is from the authentic collection or not:

  • Check to see if the collection has a blue check sign
  • Click on linked social media accounts and see if they have the large followings you would expect.
  • Look at the collection size. Fake collection’s usually have only a few items rather than thousands
  • Look at the collection sales volume. Top collections have sales in the millions of dollars while fakes will have close to nothing
  • Try buying from well established marketplaces 

Bonus - NFT hardware wallet to avoid NFT scams and hacks

One of the best ways to avoid all of these NFT scams is to buy a hardware wallet. This stores your digital assets on a physical wallet that you connect to your computer. This is essentially an offline device and therefore the safest way to store cryptocurrencies and NFTs and avoid scams. The most popular hardware wallet companies at the moment are Ledger and Trezor. If you choose this path, make sure to only order your hardware wallet from their official website Q&A

How do I know if my NFT is authentic?

Check the collection page of the NFT for size, sales volume, and social media followers. Collections usually also have a website where you can check what number in the collection your NFT is as well.

How do you prove ownership of your NFT?

This is usually done by connecting your digital wallet to a website that then can scan your wallet and see that you have the NFT in it. Only connect your wallet to websites you trust. Only click on links from officials pages and don;t open links from personal messages.

Is NFT legitimate?

NFT go is a website and app marketplace for buying and selling NFTs. Many users say they have had problems with this platform and have encountered NFTs that are fakes from famous collections that are supposedly “verified” on NFT Go. It may be prudent to stay away from this platform for the time being.