Why NFTs are a Scam and How to Spot an NFT scam?

As in the case of many things, it would be an ill-advised generalization to label all NFT projects as scams. However, in many cases, such projects are scams. So, it is possible to say that NFT is a scam after considering numerous factors.

The Internet is inundated with questions like “Why NFT is a scam,” “How to Spot an NFT Scam,” etc. It is not hard to understand why people are worried about NFT scams. Hopefully, it is possible to spot an NFT scam.

First of all, people should keep in mind that non-fungible tokens (NFTs) are one-of-a-kind digital assets belonging exclusively to the owners as well as existing on a blockchain, meaning a digital ledger. For example, you could think of one as a unique as well as a collectible piece of artwork – simply stored on the web.

At a very high level, most non-fungible tokens are part of the Ethereum blockchain. As a reminder, Ethereum is a cryptocurrency like bitcoin, but its blockchain also supports these NFTs, which store extra information that makes them work differently from, say, an ETH coin. It is worth mentioning that other blockchains can implement their own versions of NFTs.

There is no universal “red flag” when it comes to such scams. First of all, don’t panic. You have to remember that such scams work by either stealing your cryptocurrency wallet login credentials or deceiving you into believing you successfully bought or sold a legitimate NFT.

Many criminals are attracted to the monetary value attached to NFTs, which is why cybercriminals modify their usual hacking methods, such as social engineering or phishing, to break into crypto user accounts and steal NFTs.

Lana Rhoades and her NFT scam

An NFT caught the attention of web enthusiasts worldwide after reaching a market value of more than $40 billion. People are buying NFTs, as many view NFTs as a lucrative investment for holders. Nevertheless, as NFT popularity rise, so did public interest in “NFT scams.”

Let’s have a look at one famous NFT scam. Interestingly, porn star Lana Rhoades allegedly made off with $1.5 million worth of Ethereum in an apparent NFT scam. Her social media account on Twitter was very popular.

It is worth noting that the crypto withdrawal took place after she told her fans that the non-fungible tokens would be a “lucrative investment for holders,” and following the community disapproval, the porn star deleted her official Twitter account.

She first introduced the NFT project dubbed “CryptoSis” in November 2021. It is a collection of 6,069 cartoon illustrations of Lana and OpenSea, the biggest NFT marketplace. Rhoades promoted the project heavily on her social media. The social media influencer also made a point of her long-term commitment to the project.

Lana Rhoades promised the NFTs would have secondary perks such as whitelists for drops and collaborations, “playing” with Rhoades, future CryptoSis models in the metaverse, inside metaverse clubhouses/communities, or real-life tangible items and merchandise.

Popular NFT scams

Unsurprisingly, as NFTs continue to get more popular in the eyes of the public, so do scams associated with them. So, it is not surprising that people around the world have one question in mind: “How to spot an NFT scam.”

Here are several scams to know – and avoid. We can start with fake NFT websites. Experienced NFT scammers can replicate NFT websites as well as marketplaces to trick users into compromising their account information.

Because of the level of detail, skilled scammers apply, it can be challenging for even skilled NFT owners to distinguish between a legitimate website and a counterfeit. Unfortunately, social engineering scams like this could result in a person spending a lot of money on counterfeit digital artwork – making it pointless on the NFT market.

Hopefully, it is not hard to spot such websites. You should always check thoroughly the URL of the NFT marketplace website you are using before attempting to log in or make purchases.

We can move on to the fake NFT offers. Importantly, NFT scammers often pose as legitimate trading platforms and send fake offers to NFT owners via email. The purpose of such emails is to get you to follow the embedded link that takes you to a fake NFT marketplace. As in the case of fake NFT websites, it is possible to minimize risk factors. All you need to do is verify the sender address of any email received from an NFT trading platform.

NFT giveaways and social media impersonation

One question is very popular among crypto users: “Are NFT giveaways legit?” The quick answer to that question is potentially, but not likely. In many cases, scammers pose as legitimate NFT trading platforms on social media to promote NFT giveaways – also known as airdrop scams. They will usually promise a free NFT if you spread their message and sign up to their website.

Do you know how to avoid this NFT scam? Let’s find out! You need to check its social media page for verification as well as/or make sure the link sent to you matches the NFT company’s URL.

There is no lack of NFT scams, as scammers are working round the clock to create new scams. For instance, social media impersonation is another NFT scam used to deceive people who own NFTs. Using the same level of detail as scammers would for a fake NFT webpage, scammers create an online profile to persuade people of their credibility and sell them fake NFT artworks.

How to deal with this NFT scam: Just use the verification tick next to the seller’s profile to verify their identity.

We shouldn’t forget another NFT scam as well: Customer support impersonation. A hacker or a group of hackers will use the questions that non-fungible token owners have against hackers by attempting to impersonate customer service pages on communication apps like Telegram or Discord.

They create fake servers for people to connect to and ask for personal information before “resolving” their problems. As a result, scammers are able to access your cryptocurrency wallet.

Don’t worry, as, in the case of other NFT scams mentioned above, it is possible to take measures. You need to use a specific Discord or Telegram server via the NFT creator’s official webpage or social media account.

Counterfeit or plagiarized non-fungible tokens

Some people don’t pay attention to one crucial issue. People should keep in mind that minting a digital file doesn’t make a digital file a brand new piece of intellectual property or give you ownership of it – two important characteristics. This turns a digital file into something that users can store on a blockchain.

Scammers use minting to trick newbies and not only them into believing they are buying a unique NFT.

Once they have their plagiarized non-fungible token copied from someone else’s work, scammers open an account on a trading platform as well as auction it off to the highest bidder. Regrettably, the asset you purchase may become valueless once others realize it is a counterfeit. You have the ability to minimize risk factors. How to counter such problems: It makes sense to use the blue verification tick next to the seller’s Discord or social media profile to verify the seller’s credibility.

Now, we can continue with other NFT scams. For example, fake NFT projects or rug pull scams. Keep in mind that scammers often use new NFT projects to lure people into purchasing fake NFTs – or rug pull scams. Notably, this is when a scammer creates an evidently legitimate NFT that turns out not to be resellable, effectively taking away NFT’s future value. The NFT owner realizes he or she paid a tremendous amount of money for an asset that won’t appreciate as they believed it would.

Do you know how to solve the issue stated above? You need to look into blockchain explorers and rug pull detection tools designed to help identify these kinds of scams.

Investor scams, pump and dump schemes

There is no shortage of investor scams. Such scams are common with NFTs because of people’s ability to remain anonymous when dealing with cryptocurrency. In many cases, scammers use this to their benefit and create projects that seem to be worth an investment, then disappear with the money scammers collected from interested people without a trace.

You can protect yourself from scammers by finding verifiable information for the NFT creator you want to purchase from before transferring money.

We can’t finish this article without mentioning “pump and dump” schemes. Skilled NFT scammers use “pump and dump” schemes to artificially drive up the price of an NFT. Scammers do this by making a number of bids within a short time frame to make it appear as though the NFT is popular. Once it attracts the attention of people and the selling price reaches a number that scammers are comfortable with, they will cash out and sell to the highest bidder. It is possible to avoid this scam. People should check the transaction history of the desired NFT. Several transactions centered around one date indicate a “pump and dump” scheme.