NFT: watch out for scams

In 2012, the beginnings of what we now call NFTs emerged in the form of colored coins. Ten years later, these blockchain-based assets are on everyone’s lips, especially in the world of art, sports and video games.

The NFT market started to gain momentum in 2020, growing over 300% from the previous year and representing millions of dollars worth of cryptocurrency. During the first week of May 2022, the sale of these tokens then plunged by 92% compared to last September. However, the market still generates the equivalent of millions of dollars, raising many concerns about the safety of this asset. If to steal a work of art, a thief previously had to break through the security of a museum, gaining access to a digital wallet can be achieved using malware or social engineering.

When digital artist Qing Han passed away in 2020, scammers took advantage of the opportunity to sell his artwork as NFT, in his name. Last September, famous graffiti artist Banksy had his website hacked, posting an advertisement for the sale of what was supposed to be his first NFT; a collector paid $336,000. The NFT market opens opportunities for many scams:

Discord scams: The chat platform is divided into communities called servers where people can talk, stream, and play games together. Last December alone, 373 members of a Discord server run by gaming marketplace NFT had their digital wallet authentication compromised, losing a total of $150,000. Another scam on Discord involves sending DMs tricking users into thinking they are actually being contacted by a brand, artist, or influencer. Don’t be surprised by NFT projects without verifying that the offer is legitimate.

Fake social media profiles: Beware of potential fake profiles. Often these are copies of real profiles, and you only need to look a little carefully at the details to tell the fake from the real one. You should also be wary of bots that invite users to react to messages; use social media to interact with them and request information that may give them access to crypto wallets.

Phishing Fraud: Replica NFT marketplaces or fake crypto wallets are shared on Discord, Twitter, and forums, as well as through email. The level of resemblance to real businesses is impressive, and it takes a keen eye to spot small differences in the URL or general layout.

Artist impersonation: Besides Banksy and his fraudulent website, other artists have gone through similar situations. Tyler Hobbs, the artist behind the Art Blocks project “Fidenza”, has denounced the SolBlocks platform for using his code to sell replicas of his works. Derek Laufman’s artwork was also being sold by a fake account using the artist’s name, even getting a verified icon.

Pump and dump scams: The type of scam closer to NFT speculation involves a person or group of individuals buying large numbers of NFTs (or cryptocurrency) and reselling them in order to artificially create a false impression that the asset is in high demand. In this way, market forces will increase resale profits. On the buyer side, this pattern seems to be validated by influencers who share the NFT on their profiles, making it a great opportunity. Ultimately, these buyers expect to resell at a higher price, which never happens.

“Pulled carpet” scams: Scammers promote a project, solicit investment and, without notice, abandon it. This usually happens once they think they have “completely exhausted investors”, removing all funds from an NFT wallet and deleting their profiles from markets and social media.

Auction scams: Fake NFT auctions are one of the most common scams. These occur when a real seller tries to auction an NFT. The seller indicates the cryptocurrency in which they want to be paid, but a scammer can successfully change the currency of their offer to a currency of lower value. It can also work by adding and removing an NFT listing from a market, by moving the decimal number one to the right. Without noticing the change, a buyer could end up paying much more than the amount originally contemplated.

Social Media Account Hacking: Fake offers and giveaways are a great way to pique user interest. Surprisingly, they can even come from well-established user accounts. The reality, however, is that quite often these accounts have been hijacked by scammers to promote fraudulent schemes. Once a user tries to access the fake offer, they are asked to insert their password or personal details and give their contact details and get nothing in return.

Fake Mints: In these schemes, scammers drop NFTs into influencers’ wallets, making it look like the celebrities had actually minted the NFTs on the blockchain. Indeed, many buyers monitor specific portfolios for new activity to anticipate mass interest and an increase in the value of an NFT. According to OpenSea, the largest NFT marketplace, more than 80% of NFTs created for free on its platform are fake, plagiarized by other artists, or spam.

There are plenty of scams to be aware of as you dive into the world of NFTs, and as usual, scammers never pass up an opportunity to make money. It is therefore important to always be attentive.

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NFT: watch out for scams

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