Today’s world is plagued by all different kinds of scams, and right now we want to bring to your attention, the top 5 NFT Fraud Schemes to look out for in the new and sometimes scary world of trading NFTs.
NFTs, or non-fungible tokens, have taken the ever-growing cryptocurrency world by storm in the last twelve months. The process can be confusing, so allow me to elaborate a bit. In order to trade in NFTs, you first have to create a cryptocurrency wallet. In this wallet, you can buy one-of-a-kind digital art that belongs solely to you until you decide to sell it. The “non-fungible” aspect refers to that fact; they are essentially unique and are unlikely to be replicated or replaced, at least in theory. Cryptocurrencies exist on blockchains, which is a virtual ledger of the currency, and NFTs exist on the Ethereum (ETH) blockchain. This means that NFTs are bought and sold with ETH. NFT trading is a multi-billion dollar industry, and where there’s a lot of money to be had, there’s equally as much fraud.
- Classic Phishing, with a New Twist
NFT scammers are similar to other scammers in that, you always have to be aware of phishing scams. NFT scammers will often pose as legitimate NFT traders or trading platforms and send fake NFTs to sell. Once you click the phishing link, you enter a fake NFT marketplace and enter your account information. With that information, scammers will record it, and steal the NFTs in your collection.
- Fake NFT Websites
NFTs are often sold on marketplace websites like many other goods. A popular NFT scam is to replicate popular website URLs, with minor differences, to gain access to your account information once you log in. Additionally, you can end up buying fake NFTs, and lose potentially thousands of dollars on a worthless NFT.
- Pump and Dump Schemes
This scheme harkens back to securities fraud. Veteran NFT scammers will artificially drive up the price of their NFTs until they reach a point the scammer likes, upon which they will sell to the highest bidder. These scams sometimes reach into the thousands of dollars dumped into a fake NFT with no real value.
- NFT Giveaways
Nothing good in life comes free, or however that saying goes. Scammers will often pose the front of a “free NFT” in exchange for spreading their website or message and signing up on that website. Once they have your crypto wallet information, they can steal your library of NFTs, potentially robbing you of a lot of money.
- Counterfeit NFTs
There are two essential parts to NFTs: new intellectual property, and ownership of that property. Scammers will falsely “mint” an NFT, which turns the digital file into an object your can store on the blockchain. This fake mint signals to potential buyers, but what they end up with is a counterfeit of someone else’s property. This, of course, like any other piece of art, ends up hurting the resale value, diminishing it to zero.
If you found our top 5 NFT Fraud Schemes to be helpful, and you’d like to hear more about current event fraud stories, check out our previous article, Scammers Target Ukraine Donors.