How Not to Fall For NFT Scams

There are many kinds of scams in the field of high return, which has led to various NFT fraud cases;

List some typical NFT fraud behaviors

Before agreeing to any transaction, you should check and consider all details of the transaction;

Learn about the common questions about NFT scams.

Introduction

NFT stands for Non-Fungible Token, which is a digital artwork with representative ownership. They can be considered unique assets, and can also be used as coins like Bitcoin, Ethereum, and other tokens. The difference is that each NFT is unique and cannot be replaced or copied, which is why they are now very popular with web3 users such as art enthusiasts, game players, and metaverse.

NFT is bECOMIng more and more popular, and its proportion in the crypto market is increasing. More people begin to focus on and rush into the NFT market. However, there are various scams in the field of high returns, which have spawned a variety of cases of fraud using NFT. We will introduce some common NFT scams and share with you some ways to avoid NFT scams.

Types of NFT Scams

Rug Pull Scam

When a malicious cryptocurrency developer or leader abandons a project and takes away all the funds generated by the project, the so-called rug pull scam will occur. A rug pull scam is one of the common scams in the cryptocurrency investment market. After the project developers let investors buy a large number of products through marketing promotion, they then make excuses to give up the project and flee directly. The owners are unable to sell their NFTs, resulting in its price plummeting in a short time. In this kind of scam, the only profit goes to the NFT creator.

Tip: Try to investigate the integrity of the project (including online NFT marketplace, brand endorsement, team background, community, economic model, etc.).

Phishing Website

Copying the original NFT is a typical NFT scam. Here, the fraudster copies the artist’s original works and then creates the NFT. These copied or stolen NFTs are listed in the fraudster’s market account for further auction. Such NFT scams are carefully planned, and buyers may think these are original works and will buy them immediately.

Finally, the buyer realized that they were deceived by worthless works of art, and the purchased copies of this kind became worthless little images without exception.

The second case is to create NFTs similar to popular NFT collections. This kind of duplication makes investors need clarification on the true and the false. Most investors believe that this is a new series created by the original senior collection team. Such buyers who own copycat NFTs eventually become the main losers of the scam.

When searching for trading websites on the Internet, thousands of search results will appear on the web, but many of them are fake NFT trading websites. Sometimes, it may be difficult to distinguish between fraudulent websites and real websites, because fraudsters will make fake websites look the same as real ones.

What’s even worse, the fraudster can record all the information you enter on the website. Generally, you only need to provide the MetaMask wallet address to trade, but the fraudster may require you to provide the mNEMonic phrases (the master key of the cryptocurrency wallet) of the Ethereum wallet, and use the information you provide to invade your wallet and steal all your crypto assets.

Phishing is not specific to the NFT community and may involve receiving a phishing email claiming that the social media account has been stolen, and prompting users to use their login information for authentication and other phishing information. Phishing also includes participating in giveaways. Users need to enter their login information.

Tip: beware of a false login prompt.

Airdrop/Giveaway Fraud

Most of us have received ERC-20 or ERC-721 tokens as airdrops. There are many fraudsters out there trying to commit phishing fraud. The victim usually receives NFT, including some phishing information from the fraudster, such as websites or unsafe LINKs that the victim joins, and is prompted to conduct transactions. This transaction involves phishing by using a fake Metamask interface or generating malicious transactions. Tip: Do not interact with airdrop tokens or NFT.

Like the Impactor Discard Server scam, the fraudster sent fake giveaways through DM to prompt users to share sensitive information.

Tip: Don’t blindly believe in giveaways. Only participate in giveaways announced by official channels.

Counterfeit/Plagiarized NFTs

In this case, an artwork is minted as NFT, but the artwork is not the original with intellectual property rights (IP).

On OpenSea and other platforms, people can convert any image into NFT, regardless of whether they have the IP of the image. By plagiarizing NFT from other users’ works, fraudsters mislead users into thinking that they are purchasing a legal NFT, and continue to list fakes on the NFT market for auction. The buyers then bought a fake art NFT. Once the fraud was exposed by the community, the NFT would become worthless.

Tip: To prevent being cheated, you should make sure that any NFT you buy in the market is from an authenticated account. In addition, original artists can also be contacted through social media channels to confirm the ownership of NFT.

Bid Fraud

False bids in NFT auctions are one of the most common scams. This happens when the real seller tries to auction the NFT. They want to obtain cryptocurrency, but fraudsters can try to change the token they quote to a lower-value coin.

Another way is to add and delete NFT lists in the market and move the decimal point to the right by one number. Without paying attention, the amount that the buyer may eventually pay is far more than the amount they initially saw.

Tip: Be careful, especially in the process of minting NFT and transfer.

How to avoid NFT fraud

Remember to check all details of the transaction before agreeing to any transaction. For exAmple, is the market you use reputable and well-known? Can I view the transaction history of buyers and sellers? Read the comments and check the creator’s participation to see if there are any previous complaints about his/her transactions. If you want to invest in a project, please check the developers behind it to see if they really exist.

Avoid clicking on LINKs in emails of unknown origin, as they may also point to fraudulent trading websites. Do not click on LINKs or attachments from unknown sources. Do not accept NFT from people you do not know or trust. Ensure the security of your private key and mNEMonic phrases, use sTRONg passwords for your cryptocurrency wallet and other NFT accounts, and use KYC2 authentication for all NFT accounts.

In addition to the above objective suggestions, sometimes intuition will keep you away from fraud, so avoid doing any strange or dubious trades. Remember, if something looks too good to be true, it probably is.

In brief, keep the following suggestions in mind:

Keep your login information private
Use KYC2 authentication
Use a cold wallet
Avoid contact with suspicious information
Use safety tools to protect your assets
Check the seller and website information before participating
Check the transaction history of the NFT
Select only trusted NFT markets

Case Analysis: Logan Paul’s CryptoZoo

The recent shutdown of the CryptoZoo NFT project of Logan Paul, the top KOL of the US Internet, is a good exAmple case.

Who is Logan Paul? He has 28 million subscribers on Youtube, 24.6 million fans on Facebook, and 16.6 million fans on TikTok.

In the CryptoZoo project, Paul’s fans can hatch certain animals by buying an egg NFT. The animals have different rarities. Then users can continue to breed eggs with small animals to create more rare animals. When the small animals are hatched, they will produce certain tokens. The rarer the animals are, the more tokens will be produced. The playing method is very similar to that of NFT’s ancestor, Cryptocat.

Presently, the developers of Cryptozoo have gone to Switzerland with their code. Logan Paul and the developers have been involved in a long-running wrangling about whether they should pay the programmer’s salary, and the whole project has basically died.

In any case, the disputes between operators have seriously affected the rights and interests of consumers. According to public information, some fans have lost more than $500,000, and many fans thought that this was a fraud where online celebrities conspired with others to gain profits themselves, and are ready to defend their rights through judicial channels. Based on the information published by news outlets, Logan Paul has publicly announced that CryptoZoo was never meant to fail and he will look to reimburse the community in the near future. Whether it will happen or not we are yet to see but, if it does, this will be the only case where failure of an NFT project has a positive ending.

According to the Federal Trade Commission Act of the United States, online paid promotion must be clearly disclosed in the promotion tweet. Disclosure even needs to reach the level of charging details. In the case of video promotion, the blogger must mark and disclose the whole promotion video, not only at the beginning or end of the video.

When promoting virtual assets, online celebrities may violate the Federal Trade Commission Act and face administrative penalties if it does not disclose that it has paid business cooperation with the project operator. The previous typical case was the administrative penalty case of Kim KarDashian, an American celebrity, who was fined $1.26 million for promoting a cryptocurrency on social platforms in cooperation with a virtual asset service provider. Regarding information disclosure, KarDashian only indicated that the promotion was an advertisement, but did not disclose that she received a promotional fee of $250,000.

FAQ

How Does the NFT Scam Work?

Fraudsters will make false NFT trading websites. They will send a false email to the victim in the name of the platform, claiming that someone has made an NFT bid for the victim. The fraudster also often claims to be a technician sent by the platform and asks the victim to open the computer screen to share, so as to check the problem. It is often claimed that the platform is holding incentive activities. As long as you log in to the account through the activity LINK sent by him, you can get free NFTs. These are some of the most common fraudulent behaviors that may cause user asset losses.

How Are People Cheated in NFT?

For exAmple, if you click on a fraud website, you will be phished by DM in the Discord or Telegram group, resulting in the loss of personal private keys or mNEMonic phrases, or the wrong transfer out of TOKEN or NFT, wrong authorization or signature and other risky behaviors, which may lead to fraud.

What should I do if I am cheated by NFT?

Do not conduct any operation on the suspected fraudulent website to avoid disclosing more information. Avoid clicking on LINKs in emails of unknown origin, as they may also point to fraudulent trading websites. Do not click on LINKs or attachments from unknown sources.

How to Protect Yourself from NFT Fraud?

First of all, you should carefully “read the message” (the message prompt popped up by metamask), and do not start the operation if you don’t understand it (whether you can’t understand the signature or the authorization, in short, when you don’t know what you are doing, you must not operate. It is better to miss than to do wrong). In addition, have a look at the following suggestions to protect your assets:

1. Do not share your seed phrase or password with anyone.
2. Use powerful and unique passwords and KYC2 authentication.
3. Always check whether the private letter (DM) you receive is legal.
4. Do not click the LINK that promises free giveaways or asks you to answer quickly.
5. Save your tokens in the cold storage hardware wallet instead of the software (aka “hot”) wallet.

How to Report Violations of “Fraud”?

In the relevant NFT marketplace, you can report and complain about relevant NFT projects. If the project party has not yet entered some NFT market, it can “advertise” relevant fraud information to more people through relevant social media and KOL, and other relevant channels.