NFTs are everywhere, scams too. Here’s how to avoid them
Non-fungible or NFT tokens have garnered millions of dollars in sales over the past few months. Whether it’s Jack Dorsey’s tweet that brought in $2.3 million or the photo of a dog that brought in over $4.3 million in sales. Whether or not you like the concept of NFTs, these digital collectibles in the form of art, GIFs, videos, music, and more. cannot be ignored. But NFTs are no exception to scams. Now it seems that every day an NFT collector is the victim of fraud or theft.
Last week in this column we talked about how you can easily sell your NFTs. This week, we’re focusing on NFT scams, so you don’t lose your digital collectible before you make a profit.
Scams from the start
Classic stack draws are quite common in the NFT world. In October 2021, a collection of 10,000 “evolved monkeys” was released online OpenSea NFT Marketplace. The NFT Project described itself as “a collection of 10,000 unique NFTs trapped inside a lawless land”. They are “fighting for survival, only the strongest monkey will win,” he said, referring to the project’s high-profile fighting game, which did not materialize. NFT’s initial offer was to raise funds to develop the NFT-based game.
However, a week after the project launched, the developer disappeared with 798 Ether (about $2.7 million at the time). Apparently, there won’t be an Evolved Apes game, and holders of these NFTs only have one JPG left to show for their investment.
As mentioned above, rug pulls are quite common, take the recent case of the SQUID token, inspired by the hit South Korean Squid Game series. Developers ghost the whole community with $3.3 million (about Rs 22 crore) worth of cryptocurrency. The company’s social media handles as well as the website went offline in just a few days.
Social media is a popular place for these scammers. They often contact via direct messages, pretending to be sellers or buyers of people and make fraudulent promises of gifts. In return, they gain access to your crypto wallet then your funds.
Discord hacking has become the new threat for NFT buyers. A Discord server run by Fractal, a recently launched NFT gaming marketplace, was hacked, scamming 373 of its 800 members into the $150,000 Solana cryptocurrency.
The crooks are just waiting for the right opportunity to attack. Recently, pop culture icon Ozzy Osbourne’s NFT collection, CryptoBatz, went live. “CryptoBatz” is a series of 9,666 digital bats that went on sale on January 20. Hours after its launch, Osborne supporters took to Twitter and complained about a phishing scam which was draining cryptocurrency from their wallets, after clicking on a link shared by the project’s official Twitter account.
This link was modified by the NFT project and taking advantage of it, cyber criminals created a fake Discord server on the old URL. When subscribers clicked on the scam link, they were redirected to a fake Discord panel and prompted to verify their crypto assets, prompting them to connect their cryptocurrency wallets. At least 1,330 people visited the fake NFT project.
Malicious link scams have cost NFT collectors a fortune. New York-based Todd Kramer said he had an NFT collection of 16 Bored Ape Yacht Club (BAYC) worth $2.28 million (Rs 16.94 crore approx) but was hooked by an NFT DApp. Recounting his ordeal, he tweeted that he clicked on a link that appeared to be a genuine NFT DApp (decentralized application). But it turned out to be a phishing attack and his entire collection was stolen.
NFT is an ever-growing space, so if you’re a newbie or even familiar with the space, here are some key tips to reduce the possibility of getting scammed.
Be sure to check the market first to list your NFTs. There are several marketplaces that promise much lower gas fees (transaction fees to upload your NFTs), and even claim to rank your NFTs on its homepage, but in return they ask you to connect your crypto wallet.
Once you’ve done that, the game is over. Only trade NFTs from a trusted marketplace like Rarible, Foundation, and OpenSea. Do not download any DApp that claims to be an NFT marketplace.
Understand that hackers are hiding behind your cryptocurrency wallets, which store your crypto-tokens and NFTs, so avoid clicking on links, as they can also lead to scam exchange sites. Be smart with your wallet credentials and never share your seed phrase (recovery phrase) with anyone.
Beware of fake gifts. Although genuine platforms also tend to offer free NFT giveaways as part of their marketing programs, check whether these are genuine or not. Ideally, if it’s too good to be true, it’s probably a hoax. Check if an NFT website is secure or not, you can use tools like Trend Micro which is available for free.
Buy from a verified seller, most legit NFT sellers will have a blue checkmark next to their usernames, and collection properties will be clearly listed. Stay away from love scammers, they try to trick you into investing in certain NFT projects. They may even send you links to fake NFT websites or ask you to send them money. Be careful.
Even if you follow all the aforementioned tips, there is still no guarantee that you will not be scammed. It should be noted that NFTs are still a relatively new concept, so there is still a lot to do.
The NFT space is still relatively unregulated, which offers a lot of potential for cybercriminals to exploit loopholes. So stay alert, make informed decisions and never invest more than you can afford to lose.
For more news on cryptocurrency, NFTs, and more, check out our Crypto Knight column every Saturday.