All you need to know about NFT scams

- NFTs are new, and therefore we see scammers flooding to them - All NFTs should be kept in “cold wallets” - Most scammers are running old schemes that you may recognize

NFTs, or it non fungible tokens, have taken off in popularity over the last year or two. That being said, it has attracted a lot of scammers from other parts of not only the crypto world, but financial worlds in general. As a general rule, any time something explodes in value quite quickly, it will attract a flood of new people, both good and bad.

While the actual utility or value of an NFT is completely debatable, the one thing that most people agree on is that the amount of NFT scams is growing every day. In fact, at the beginning of the year the search giant Google reported that searches for “NFT scam” hit an all-time high. This makes sense, as interest in the market has hit an all-time high as well.

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Crypto wallets are crucial

One of the biggest concerns for a retail trader is to keep their crypto wallet safe. A crypto wallet will typically be the most important part of any scam or safety when it comes to not only your crypto, but NFT purchases as well. Because of this, you need to not only have a crypto wallet, but quite frankly you are better off using what is known as “cold storage”, which is a device such as a Ledger or Trezor wallet. This keeps your private keys off-line, thereby making it even more difficult for any type of hacking and/or scamming. These have a major advantage over so-called “warm wallets” because it is not software attached to a browser or software that stays online. It is more like a USB drive that can be completely disconnected.

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Unfortunately, some people give their private keys away via some of the scams that have been gaining popularity. Once you give your private keys away, scammers can simply take your crypto. What is even worse is if you find yourself in a situation where your “seed phrase” is compromised. This is the backup phrase of wallet that allows you to access your private keys from a lost device, or a new one. If a scammer has this in their possession, your crypto is as good as gone.

Giveaway scams

Giveaway scams are rather common when it comes to the crypto world and are starting to pick up momentum in the NFT sphere. It works the same way with NFTs than it does with coins, generally with either an influencer or someone claiming to be with an exchange giving away NFTs. Generally, there is some type of “pay to play” type of scenario, where you need to send a certain amount of crypto to a wallet in order to “confirm your crypto wallet address.” At that point in time, the thief already has your crypto. They also can involve having you send Ethereum in order to “build the NFT.”

In the same vein as the giveaway scam, you may find yourself being targeted by an airdrop scam. Airdrops can have malicious coding in them, and quite often will have the name of the website attached to it. The idea is to get you to go to the website if you are trying to sell the NFT. They make these tokens or NFTs unsellable, so it locks you into the scam, where they force you to give them access to your funds. At that point time, you are looking for trouble because they will certainly take it. Influencers and crypto enthusiasts that are well-known get airdropped NFT and coin freebies all the time, so that the person designing either the coin or the NFT can claim that the influencer is a holder. In that particular circumstance, it becomes more or less a marketing scam. Keep in mind that this happens more than most people realize, so do not take any influencer holding a token or NFT as an endorsement unless that person specifically says so.

Phishing scams

Phishing scams are as old as the Internet. They run much like the older versions of the phishing scam, typically through email. What will happen is they send an email that has some type of promise that if you get a hold of them, massive returns will ensue. Typically, you will notice that the return address of the email is not the same one you received the email from. When you answer, then the scam begins. At that point, it can become an amalgamation of various different types of schemes.

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Another common type of phishing scam is built into a hyperlink. The hyperlink takes you to a website or some type of app that tries to convince you to input your private key information. As with any other time that a scammer has access to your private keys, your crypto wallet is as good as emptied. Quite frankly, if somebody sends you an advert through email, you should never click on anything. This goes with almost all industries, but it is especially true with anything to do with finance. In short, if you did not request the information, it is probably best to simply look the other way, as at best they are trying to sell you something. At worst, they are trying to steal from you.

Investment scams

The clearest red flag that you may see when it comes to an investment scam is a promise of massive returns. In fact, it is impossible to know what the future outcome of an investment will be, which is why you quite often will see the phrase “Past performance does not guarantee future returns” when it comes to a reputable broker, investment advisor, or exchange. Anyone who claims that they can do something along the lines of doubling your money in a very short amount of time is somebody to be held in suspicion, and quite honestly avoided at all costs. In fact, professionals will not guarantee anything going forward, because they understand that the markets are highly volatile at times, and nothing can be promised. The honest and competent will, however, offer a trade history to show that they are in fact profitable over the long term.

When it comes to the NFT world, it is still new that there is no such thing as an “expert” when it comes to the next big thing, because it is much like the Internet, in the sense that nobody really had an idea of what it would be back in 1995. We are essentially in the same boat here, because the NFT market will almost certainly go beyond pixelated pictures and into more useful and utilitarian formats. What that is, we do not know, and certainly somebody that is advertising for you to pay them will not either.

Imposter websites

Imposter websites are not as common as they used to be, at least not by themselves. Typically, the imposter website is something that accompanies a phishing scam, as they try to get you to click a link to something that may look like an exchange, investment site, or even a bank. The idea is to part you with your currency, crypto, or even an NFT. Again, this comes down to getting your private keys from your crypto wallet and trying to empty out the contents. The private keys to your crypto wallet is the goal in almost all scams. (The ones that don’t involve you sending crypto, that is.)

Anytime there is a financial transaction to be made online, you are better off checking the website address and making sure that it is official. Some antivirus software will even have a “banking browser extension” that will check the site for you. While there is no “one-size-fits-all” type of solution to this problem, the reality is by just simply paying attention you can normally spotted imposter. They may have an extra letter in the address or might have a “.US” extension or variation instead of the “.com” that you would expect from a large organization I have.

Another thing that can separate imposter websites from the real ones is that in the crypto world, most transactions involve a couple of steps to go through safeguards. Any website that does not have that set up is one that you should avoid at all costs. While the criminal wants the transaction to be easy, you do not.

Fake apps

Fake apps are probably one of the least common issues out there simply due to the fact that it takes a certain amount of effort to build them. Nonetheless, you do not want to download any apps to your phone that are not widely used. Furthermore, you do not want to download any apps that are not available on a larger marketplace such as Google Play, the Apple Store, etc. If it does not have thousands of downloads from a reputable place like that, the general rule is to simply leave it alone.

You should never download an app directly from a website unless you know for sure that the company is legitimate. They should be regulated in the country that they domicile in, perhaps via some type of exchange regulation. Nonetheless, any company that goes through all of those hoops will probably put their app up on one of the larger stores.

Social media

Social media is a bit of a tricky subject when it comes to NFTs, simply because most of the gains that you will see in an NFT marketplace are due to “hype.” Most of that hype comes from social media influencers and the like. For example, if Elon Musk suddenly likes a particular collection of NFT art, it will almost certainly have a positive influence on the pricing. However, whether or not that ends up being a long term thing is a completely different question. One simply needs to look at the price chart of Dogecoin to see how volatile that type of publicity can be.

Most of the problems you are going to have with social media will be people scamming their followers. Anytime you see an influencer peddling some type of NFT collection, you should probably avoid it. This is especially true if it is somebody who has no real experience in the NFT world. Let us face it, most people do not because it is a relatively new part of the markets. NFT holders will have a lot of growing pains, because we are still trying to figure out what this market is going to be when it grows up. If you truly believe in an NFT, you should put it in your crypto wallet and leave it be for the longer-term. They are very difficult to trade in the same way crypto is, simply because each NFT is a one-of-a-kind object.

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Social media, while popular with a lot of millennials and zoomers, is not exactly where you go to get professional advice. If you truly wish to invest in the NFT markets, you need to do your own research through reputable financial websites and the like. You will notice that on social media a lot of the influencers try to do everything they can to be outrageous, simply to attract a lot of attention. As another rule: If they flaunt their money, it is probably best to avoid them.

Scamming emails

Scamming emails are generally part of a phishing scam, but they can also be part of a “pump and dump” type of situation. In the phishing scam, it is obviously all about trying to get you to click a link and give up vital information. However, a “pump and dump” type of scam will tell you about how great a collection of NFTs are, and how they are “going to the moon!” To avoid this scam, it is rather simple. Do not pay any attention to it. You have to ask yourself the obvious question here: “If these NFTs are going to become so valuable, why does this random person have to reach out to strangers to tell them about it?” Any random email you get telling you about how great a financial product is going to be is at best just marketing. In other words, it is a commercial.

Unfortunately, a lot of people will take heed of these emails and go out to buy these NFTs. The designers of these collections are typically selling them directly to people who are getting involved. People will very quickly find out that there is no real market for them, and they are left “holding the bag.” A lot of the people that are taken advantage of have recently read headlines about an NFT that has sold for millions of dollars and are quick to throw Bitcoin or Ethereum at something with the hope that they too can catch “lightning in a bottle.”

Conclusion

Unfortunately, anytime there is a lot of quick money to be made, or even any time that there has been a lot of money made in the headlines, scammers will come running. This has happened in the NFT market almost immediately. When it comes to anything involving crypto, this is especially true as the transactions are irreversible. This is even more enticing as a lot of the scammers will be across international borders, meaning that they are essentially “untouchable.”

You must use a crypto wallet to store any NFT that you buy, and you are better off using a “cold wallet.” That way, your keys are always safe, unless you fall for a scam. Luckily, most scams are easily identified if you know what to look for. The private keys should be thought of in the same vein as a credit card number or a bank account number and protected just as vehemently. Because of this, you should never give this number to anyone, much less somebody who is a random person online.

We are just now starting to see NFT scams really take off, so they will change. They will become more common going forward, especially as you start to hear headlines of an NFT selling for millions of dollars. Unfortunately, markets attract a lot of people looking to get rich overnight, and that makes this a perfect place for criminals to congregate and prey on those who do not know any better. It is your job to know better, and to protect your assets. You must not give crypto or money to anybody in order to get an NFT unless you know that they are reputable. You need to ask yourself “Is this too good to be true?” If it is, then walk away. There are literally millions of ways to make money, so you do not need to take a risk with something that you are not overly convinced of.

As time goes on, the scams will get a bit more complex, but you should also keep in mind that a little bit of common sense goes a long way when combating these scams.

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