Research shows that NFT scams have increased by 400% in the UK between 2020 and 2021
The experts at NFT Club have put together a guide to help investors protect themselves from the most common scams targeting NFT owners and buyers.
1. Phishing scams
There has been a surge in replica and fake stores made to look like the original ones in order to trick users into logging in or inputting their credit card information, this is what’s known as ‘phishing’. Scammers target investors by creating fake advertisements, asking users to input their private wallet keys or seed phrases via email, discord, telegram and other public forums.
Scammers are also getting in touch with users over Discord and Twitter, impersonating OpenSea or Metamask support staff. This is with the aim of tricking people into exposing their security phrase or sending links to fake customer service websites, where you are asked to input your credentials. If you are seeking technical support always go directly to official customer support websites and never share your recovery phrase.
Four top tips to avoid phishing scams:
If you are seeking technical support always go directly to official customer support websites and never share your recovery phrase.
Write your seed phrase down on paper and never give it out to anyone, don’t even keep a photo of it on your phone.
If you receive a suspicious email, always check the sending email address and never open links from an unknown sender.
The best way to verify the authenticity of the site you’re on is to use websites like ScamAdviser and Trend Micro Check. But the best bet to stay safe is to stay on legitimate sites such as OpenSea.
2. Pump and dump
Pump and dump refers to when a group of people buys up a bunch of NFTs and artificially drive demand up, often by spreading misleading information. When the price has risen substantially the scammer dumps the asset, causing a significant price drop and leaving investors holding NFTs worth much less.
This type of scam often targets small, barely known NFTs as their price tends to be more easily manipulated. Schemes are often also promoted by influencers and even well-known celebrities through social media, with regulation around this kind of promotion still a grey area.
Four top tips to avoid pump and dump scams:
Be critical about what you see online. Verify the credentials by checking the history and wallet record of the project you’re interested in. You can do this on OpenSea or any other marketplace by viewing the number of transactions and buyers for the NFT collection. Also make sure to check out the whitepaper and website of new projects.
There can be huge pressure in the crypto and NFT community to jump on opportunities as quickly as possible, but you should never feel obligated to invest in something just because it’s what everyone else is doing.
If an influential person or celebrity suddenly starts hyping up a new NFT collection, be wary as there is a good chance it’s a scam.
Also follow the project on Twitter and Discord, legitimate collections with good liquidity will have an active community of investors where people talk and share information.
3. Counterfeit NFTs
Scammers are ripping off artists by making copy collections and trying to confuse people into buying the wrong asset. Minting an NFT is easy and means anyone can upload a photo or image into an NFT, regardless of whether they own the intellectual property rights to it. Scammers are creating fake OpenSea accounts to sell their counterfeited NFTs to investors who are then left with valueless assets.
Four top tips to spot counterfeit NFTs:
Consider whether the price of the NFT seems legitimate and check if the contact address of the NFT aligns with that from its creators website.
Does the artist have a blue checkmark to signal their verification status on OpenSea or other NFT marketplaces?
Find the artist on Twitter or other social channels and see if you can verify the artwork as belonging to them yourself.
Additionally, you could ask other members of the community on Twitter or discord if you are still unsure.
Check out the full guide here.
Sheba Karamat
Sheba has 20 years’ experience in growing and running recruitment businesses, placing executives with financial and digital tech backgrounds into organisations such as Disney, Aviva, BBC, Barclays, News UK and Penguin Random House. Heavily involved in the sale of her previous recruitment business to James Caan CBE, the Dragons Den entrepreneur. Founder and CEO of Coin Rivet and mother to four amazing children.