Crypto NFT Scams: 10 Bulletproof Defenses

NFTs are digital assets, such as images or videos, stored on a blockchain (which is an immutable ledger). With this technology, you can be sure that NFTs truly belong to you and can protect yourself from crypto nft scams

Unfortunately, many scams are out there, including fake NFT giveaways and/or bad links. Scammers can easily create fake sites that lead to loss of money. Therefore, billions are being stolen yearly from innocent victims; for example, a Mumbai-based artist lost thousands overnight because of a fake NFT platform.

This article lists ten real NFT scams and includes many simple ways to remain safe from them. You will be able to recognize scam indicators and keep your NFT purchases secure. At the end, you will have gained experience to potentially protect your cryptocurrency portfolio like a pro.

NFT scams are as prevalent as ever. Millions have been stolen in 2022 alone using fake airdrops, phishing links, and/or rug pulls. In fact, a Mumbai artist lost 12 Ethereum after being lured to a fake verified NFT marketplace. Here are ten examples of actual NFT scams and ways to ensure that you are not impacted by them.

You will learn to identify warning signs of these scams, keep your NFT purchases safe, and be able to safely swap NFTs without falling victim to scams. In the end, you will have the skills and knowledge to protect your crypto endeavors as a professional.

Crypto Scams Using NFTs rely on the complex technology of decentralization and the hype surrounding it to lure unknowing investors into their schemes. Unfortunately, these scams are not just innocent annoyances; they are highly organized and efficient business transactions designed to steal an investor’s entire digital assets within minutes and leave no trace behind to recover stolen assets.

The foundation of this scam revolves around the concept of exploiting people’s trust and their limited understanding of the technical aspects of their NFT investments. Fraudsters create highly convincing counterfeit NFT projects, impersonate well-known NFT platforms or manipulate people by using social engineering techniques to gain access to a person’s private key, which gives the user 100% access to the user’s digital assets.

To successfully navigate through the cryptocurrency NFT landscape, you must be proactive and skeptical. Everything you do in connection with NFT transactions must be based on meticulous verification through independent channels and verification of any conversation you have in connection with NFT transactions, including, but not limited to, whenever you receive direct message communications via Discord or any time you receive email communications regarding exclusive NFT sales.

A common way that Crypto NFT scams function is through creators exploiting the concept of urgency and exclusivity. Scammers usually create exact replicas of a website so that when you connect your digital wallet to one of their sites, it appears to be a legitimate marketplace or project landing page.

The way in which this type of scam works is that once you have connected your wallet to the fake site, the scammers will either steal your funds directly by getting you to confirm a request for a malicious approval or by tricking you into signing a transaction that sends valuable NFTs and/or cryptocurrency from your wallet to theirs by pretending to be performing a legitimate action like minting.

Another method that scammers employ is manipulating market sentiment toward their NFTs. Scammers generate hype around their worthless NFT offerings by making fake social media postings about them and have many different wallet addresses purchase their own NFTs to create the illusion of demand. Once their unsuspecting investors start to purchase their tokens, the scammers will “rug pull” and sell off every token they have made.

Learning about common patterns can help you protect yourself against scams. A widely-known scam is called “sleep minting.” This means that a person creates a collectible token out of an original artist’s work, and sells it without obtaining permission from the artist. This results in lost revenue and ownership for the artist.

Scammers also use a method called “pump and dump.” In this case, the scammer artificially raises the price of a worthless NFT collection by promoting the collection aggressively, sells their NFT holdings, and leaves latecomers with worthless digital assets.

Both “exit scams/rug pulls,” in which a creator collects money, then disappears without any trace or indication that they had created an NFT collection, are serious and ongoing threats to the NFT community. Before investing in an NFT, always do your due diligence by researching the team behind the project and looking at the project roadmap.

Visually similar to the Web2 market platforms like OpenSea or Rarible, fake NFT marketplaces are an example of a visual trap. They have similar design elements; such as logos, branding and even listing. However, if you look closely at the URLs, you’ll see that they usually have a subtle misspelling or contain additional characters.

When you connect your wallet to a fraudulent website, it may ask you to “approve” a transaction request. By clicking this button, you will give the scammer “unlimited” access to your wallet and enable them to remove all of the NFT tokens and cryptocurrency from your account without a trace.

Rug pulls can be devastating to an investor. The team behind a rug pull will usually create a “hype” around their project, showcase the utility or future value of the NFT token, sell out the entire collection and then disappear with the money. Therefore, make sure you check the backgrounds of the teams behind projects and obtain a copy of the white paper as well as long-term roadmaps prior to investing in these types of projects.

Scammers are finding it easier and easier to target individuals in the NFT market. Be on the lookout for phishing emails or DMs that pretend to be from well-known platforms offering exclusive mints of NFTs or airdrops of “free” cryptocurrencies. Most of these emails and DMs contain links that are meant to steal your wallet seed phrase.

Fake airdrop scams are particularly deceitful in that they will randomly show up in your wallet, and if you attempt to: sell or use these fake NFTs, you will be taken to a phishing site that asks for your wallet approvals so that they can transfer your money out of your wallet and into their own. Never interact with an unsolicited token.

A large number of scams take place through social media platforms. Many social media platforms have active impostor accounts that impersonate well known NFT influencers and founders, and these accounts will send you DMs promoting private sales or whitelist spots for projects. Always verify the identity of these senders through official channels prior to clicking on any links or participating in anything.

Keep your cryptocurrency wallet secure, and never share your seed phrase (recovery phrase) with anyone. This phrase, which is made up of 12 or 24 words, is your key to accessing your entire crypto portfolio. You should keep your seed phrase stored offline in a safe, physical location.

When storing valuable NFT assets or cryptocurrency, you should always use a hardware wallet (such as a Ledger or Trezor). Hardware wallets protect your private keys from being accessed online, which means that even if your computer is hacked, it is highly unlikely that hackers will be able to steal your private keys.

Connect your wallet to only dApps and websites that you are certain are safe and trustworthy. If you are planning to use a reputable website, create a “burner wallet” and move only a small amount of cryptocurrency into it so that you can explore new projects safely. If the project is a scam, then you limited your risk by using a burner wallet.

Keep your cryptocurrency wallet secure, and never share your seed phrase (recovery phrase) with anyone. This phrase, which is made up of 12 or 24 words, is your key to accessing your entire crypto portfolio. You should keep your seed phrase stored offline in a safe, physical location.

When storing valuable NFT assets or cryptocurrency, you should always use a hardware wallet (such as a Ledger or Trezor). Hardware wallets protect your private keys from being accessed online, which means that even if your computer is hacked, it is highly unlikely that hackers will be able to steal your private keys.

Connect your wallet to only dApps and websites that you are certain are safe and trustworthy. If you are planning to use a reputable website, create a “burner wallet” and move only a small amount of cryptocurrency into it so that you can explore new projects safely. If the project is a scam, then you limited your risk by using a burner wallet.

It is important to act right away if you have been the victim of a crypto NFT fraud, but unfortunately recovering your funds can be a tedious process. In India, your first course of action is to collect as much evidence as you can including transaction hashes, wallet addresses, links to scam sites and screenshots of all communication.

As soon as possible, file a report on the National Cybercrime Reporting Portal (cybercrime.gov.in). Include all the evidence that you have collected. Even though law enforcement may have difficulty tracking down operators of crypto transactions, your report will help in identifying patterns of operation and pave the way for future investigations.

In addition, make sure you also contact the NFT marketplace or exchange associated with the fraud. They might be able to identify the wallet of the scammer and potentially prevent the transfer of any funds to that account until further notice. If you have been harmed by crypto fraud, obtain a lawyer that specializes in this area for additional support.

Scammers are always changing their tactics. Expect to hear about new and improved sleep minting attacks in the near future. These attacks utilize AI to create realistic artwork and mint it without the knowledge of the creator. This will create a flood of counterfeit intellectual property, resulting in new forms of cryptocurrency NFT-related scams.

Social engineering, including voice phishing (vishing), will become even more sophisticated as deepfake technology becomes more prevalent. The scammers may impersonate the voice or image of the founder of a project during a video call, potentially getting you to divulge sensitive information or approve malicious transactions.

New blockchain networks and cross-chain bridges will also present new types of vulnerabilities. Thus, always exercise due diligence when using new or experimental platforms, as they are very likely not to have undergone the same level of thorough security audits that more established ecosystems do.

When considering investing in any NFT, you should perform thorough due diligence and do your research. Make sure to analyze the whitepaper, look for team transparency (preferably verified or doxxed), engage with the community, and have long-term utility before you purchase an NFT. You should avoid projects that promise guaranteed, ridiculous returns.

Additionally, make sure you only use official links from the project’s verified Twitter account or Discord server when minting your NFTs or participating in marketplaces. Don’t click any links sent directly via DM, email, or found on any unverified aggregation sites. Following this one step will help you avoid the majority of the crypto/NFT scams being perpetrated through URL spoofing.

You should have multi-factor authentication (MFA) enabled for all your exchange accounts and store your valuable NFTs in a secure hardware wallet. Check your wallet frequently for any dApps that you no longer use or that you do not recognize and revoke access to them.