7 Most Common NFT Scams

The State of Crypto Scams

First, we need to address the elephant in the room — crypto scams are nothing new. Blockchain-related activity isn't any different. Simply put, illegal activities exist wherever profits can be made. Why have they become of particular notice in NFTs? There are numerous reasons that warrant careful examination.

NFTs, perhaps more than any other blockchain-based concept, have succeeded in spreading to the mainstream public. In recent years, there were around 280,000 buyers and sellers of NFTs and about 185,000 unique wallets. Many of these participants are new to the world of crypto, making them likelier victims of fraud. This demographic shift has created a vulnerable user base that scammers actively target.

Global NFT sales have jumped to over $4 billion in recent periods, while Google searches for "NFT scam" hit an all-time high. All types of commerce, unfortunately, involve the existence of scams. The rapid growth of the NFT market has attracted both legitimate investors and malicious actors seeking to exploit the enthusiasm surrounding this new asset class.

It's important to note that an NFT containing an image is not your actual ownership of that image. You can't reproduce it or use it commercially. Instead, you are taking ownership of the record of your purchase on the blockchain. Another person can buy the record of the purchase associated with the image. This fundamental misunderstanding about NFT ownership has led to confusion and created opportunities for scammers to exploit uninformed buyers.

This makes it difficult to regulate the NFT market in the same way that the classic art market might be. Stealing a Van Gogh painting will attract legal penalties. Art dealers seek originals. And even the swanky, classic art world is, generally, made up of a small, tightly-knit community. The decentralized and pseudonymous nature of blockchain transactions makes it challenging for authorities to track down and prosecute fraudsters.

NFTs can support digital artists by creating scarcity and allowing buyers to own unique digital files. However, solving certain issues remains important. These include the resource cost of transactions on the blockchain. The multitude of hustles and scams also needs to be addressed. By better understanding them, we can learn to protect ourselves and make informed decisions in this evolving market.

Some Well-Known NFT Scams

Evolved Apes

In the past few years, the release of 10,000 "Evolved Apes" was one of the most famous NFT rug pulls or scams. This fake NFT project was quite typical for this space in many ways. Cartoonified ape designs are particularly common among NFTs following the success of Bored Ape Yacht Club, which has inspired numerous copycat projects.

Buyers received a unique ape design. It also had promised use in a proposed blockchain fighting game where apes could battle each other. Winners would receive cryptocurrency rewards, and the NFTs were supposedly funding a game that was in the development stages. The project generated significant hype through social media marketing and Discord communities, attracting thousands of eager investors.

Unfortunately, the developer, who went by the pseudonym of "Evil Ape," disappeared shortly after selling the NFTs. By that time, he had earned 798 Ethereum (around $2.7 million at the time). Purchasers had no way of responding to what had happened. The Evolved Apes game did not exist. Those who bought the scam NFTs were left merely with a JPG as a souvenir of their investment. This case became a textbook example of a rug pull, where developers abandon a project after collecting funds.

Mercenary

Another popular scam was Mercenary. This was a medieval-themed NFT-game with play-to-earn features and a new cryptocurrency token, Mercenary Gold. The project launched in recent years with ambitious promises. The Mercenary scammers paid for advertising on Twitter through crypto news outlets, which raised people's interest and gave the project an air of legitimacy.

It was all a hoax though. Those behind Mercenary Gold escaped with at least $760,000 from their NFT scam. They were also accused of other scams across different blockchain projects. The owners removed themselves from social media and have seemingly disappeared without a trace. The project's website was taken down, and all official communication channels went silent, leaving investors with worthless tokens.

More Ape Scams

Big Daddy Ape Club looked to be a parody of the aforementioned and much more successful Bored Ape Yacht Club project. Celebrities like Jimmy Fallon and Paris Hilton expressed interest in the Bored Ape Club. None of them endorsed Big Daddy Ape Club, as advertising may have led some to believe. The scammers cleverly used the popularity of ape-themed NFTs to attract unsuspecting buyers.

Scammers behind Big Daddy Ape Club persuaded customers to "mint" their fake NFT for a premium price of 1 Solana. This was approximately $135 at the time. In the end, the NFT could not be minted. The Solana tax, however, would be deducted, meaning victims lost their investment without receiving anything in return.

The NFT scam targeted over 9,041 people. This netted them more than $1.3 million. The website SolRarity points to the fact that this isn't the first time this group has scammed people in the crypto world. This is likely the third fraud perpetrated by the person or persons behind Big Daddy Ape Club, based on the wallet activity. The serial nature of these scams highlights the importance of conducting thorough due diligence before investing in any NFT project.

NFT Pump-and-Dumps

Unfortunately, pump-and-dump schemes have become somewhat predictable in crypto and now in the NFT markets. Pump-and-dump schemes refer to when a group buys up NFTs or currency, artificially driving demand up. After they succeed, the scammers sell off when prices rise and leave others with worthless assets. This manipulation tactic has been used in traditional financial markets for decades and has found new life in the largely unregulated crypto space.

It is also common for cryptocurrency trading to engage in wash trading — the buying and selling of assets by the same person. This can drive up the price artificially. The asset appears attractive to naive traders who believe that the price will rise or that they have just landed an amazing deal. Wash trading creates false volume and price signals that deceive potential buyers into thinking an NFT is more valuable than it actually is.

NFT projects have also faced accusations of pump-and-dump practices. For example, The Athletic alleged that members of teams of SoRare NFTs football players bought the NFTs for the purpose of hiking interest. Even the record sale of Beeple's digital work faced the same NFT scam accusation. Various publications allege that the buyer, who goes by the pseudonym of Metakovan, purchased the work with a view to finance a pump-and-dump scheme involving their own token, B.20.

Large NFT Projects Can Be Involved

One of the first NFT applications was the CryptoKitties. The NFTs are on the Ethereum blockchain. After their launch in late 2017, these were hugely popular NFTs. One of the most sought-after cats sold for $155,000 worth of Ethereum. Six months later, the prices had dropped by 95%. This dramatic price collapse left many investors with significant losses and served as an early warning about NFT market volatility.

How do you avoid this fake NFT project scam?

Firstly, you should check the history and wallet records for the project. OpenSea and any NFT marketplace will allow you to see the total number of transactions and buyers that have purchased NFT collections. EtherScan allows you to see all transactions on the Ethereum blockchain, providing transparency into trading patterns.

Also, make sure to follow the project on social media. Check their Twitter, and join its Discord server. A project should have a lot of investors and collectors to ensure it has good liquidity, artistic value, and a long-lasting community. Look for genuine engagement rather than bot accounts or paid promoters.

Plagiarized NFTs

These fake NFT scams are becoming consistently more popular. However, there has been an increase in the reports of NFT theft. Artists have had their work copied, made into NFTs, and sold to people who think they are getting the real deal. This problem has become particularly acute as the NFT market has grown, with scammers targeting both established and emerging artists.

DeviantArt is a popular online community with over 70 million members and half a trillion pieces of art. Many artists claim that they were the victims of theft. DeviantArt has launched a new tool to scan public blockchains and third-party marketplaces. It alerts its members of possible fake NFT art fraud. Since its implementation, it has sent over 50,000 alerts about possible NFT violations, highlighting the scale of this problem.

NFTs and Intellectual Property

Remember that minting an artwork as an NFT does not mean you have intellectual property rights. OpenSea's user-friendly software makes it easy for anyone to turn any image or photo into an NFT. Scammers or bad actors can easily steal the work of artists and create fake OpenSea accounts where they sell counterfeit artwork. Your NFT will be worthless if the community discovers what the scammer is doing. Furthermore, if this happens, there will be no way of getting your money back.

Do your research before buying NFTs from any marketplace. Understanding the difference between owning an NFT and owning the underlying intellectual property is crucial for making informed purchasing decisions.

The blue checkmark next to an artist's profile picture in OpenSea and other NFT marketplaces is a sign that they are verified. Find the artist via Twitter, their website, or any other social media channels if there is one. Ask the artist directly if the artwork is theirs and if they have the correct user profile. Ask others in the Discord channel to verify the information. Cross-referencing multiple sources can help confirm authenticity.

Phishing Scams

You will need to sign up for a crypto wallet to buy your first NFT. MetaMask is the most popular Ethereum wallet to collect NFTs. However, its popularity has made it a prime target for scammers who create sophisticated phishing attacks.

MetaMask customers were targeted recently in a phishing scam that involved phony ads asking for their private wallet keys and 12-word security phrase. It's not the only attempt to obtain your security information, either. Fake NFT malicious pop-ups are also available via Telegram, Discord, and other public forums. These scams often appear remarkably authentic, mimicking official communications from legitimate platforms.

A phishing attack can get your personal information and drain your digital wallet. Ozzy Osbourne's "CryptoBatz," a collection of 9,666 digital bats, was subject to this. Just two days after tokens were issued, supporters were being targeted with a fake NFT phishing scam. This scam drained cryptocurrency from wallets. It worked by making use of a link posted by the official Twitter account of the NFT projects, demonstrating how even verified accounts can be compromised.

What should you do to be protected from such a scam?

Keep your private information private! You will need your seed phrase to create a hardware backup of the crypto wallet, or to recover your wallet. You should not enter any information in the MetaMask popup or any other popup! For any cryptocurrency transactions, always go to the verified website and never use pop-ups, links, or your email. Legitimate platforms will never ask for your seed phrase or private keys.

Never give out your seed phrases to anyone! This cannot be stressed enough — your seed phrase is the master key to your wallet, and anyone who has it can access all your funds.

Fake Crypto Influencers

The popularity of NFTs has led to numerous celebrity endorsements. These celebrities profit in a variety of ways. However, because NFT trades are done online, there is a finite amount of information that the public has regarding the marketing for the project. Certain scams involve fake endorsements. Before the public realizes that the supposed celebrity brand ambassador is not actually involved, many people are likely to have lost their money.

In recent years, there was a lot of interest in social media posts about notorious rapper 6ix9ine's NFT Trollz collection. The creation of the avatar would provide royalties to the NFT holder, with 5% returned to the original owners of Trollz tokens on every trade. The project made bold promises about ongoing revenue streams for investors.

Questions concerning legitimacy immediately popped up. It claimed that $100,000 would go towards various charities. Many buyers of the NFTs now claim that none of that happened. The discussed royalties never materialized either. None of the philanthropic work that the project promised even started. This case illustrates how scammers use celebrity associations and charitable promises to lend credibility to fraudulent schemes.

To avoid these scams, first of all, make sure to research the project. Is the celebrity endorsement the real deal? Is the project likely to live up to its promises? Look for official announcements on verified social media accounts and be wary of projects that rely heavily on celebrity hype without substance.

Outbidding Scams

Bidding scams are most common in the secondary market. They occur when someone has already bought an NFT and is looking to resell it. Bidders may look to change the cryptocurrency used after you list your NFT sales. This is a red flag! Naturally, $5 won't be the same as 5 BTC. This tactic exploits sellers who may not be paying close attention to the details of their transactions.

Double-check the currency and refuse to accept lower offers than you are willing to accept. Always verify the exact cryptocurrency and amount before confirming any transaction. Scammers rely on sellers being distracted or in a hurry to complete sales.

Scam Websites

Once purchased, these NFTs go missing. It is because the contract that exists on the blockchain is different from the actual artwork. When you upload original art onto a platform like OpenSea, this will be purchased using cryptocurrency such as Ethereum. This is a smart contract.

The smart contract is actually what gets minted on the blockchain. The content that is not part of the smart contract. NFTs only refer to the ownership of assets. The asset itself can be anything. This technical aspect of NFTs creates opportunities for scammers to create misleading listings.

It is therefore important to make sure that the centralized platform that you are using is trustworthy. Make sure that you don't end up simply buying a link to an image. What is stored on the URL can always be changed, leaving the buyer, essentially, with nothing. Some scammers create fake marketplaces that look legitimate but are designed to steal funds or sell worthless NFTs.

To avoid being scammed, when you purchase an NFT, ensure that you also own the tangible or digital asset, such as a JPEG or MP3 file or PDF file. Verify that the NFT metadata points to a permanent storage solution like IPFS rather than a mutable URL that can be changed.

Technical Support Scam

Unlike most of the fake NFT scams, this scam is pretty straightforward. It involves the scammer masquerading as a customer service executive for various NFT projects. The idea is to establish contact with you and then ask for sensitive personal information. Many of these scams occur on Discord, Telegram, or Reddit. These are forums that are very popular with crypto supporters. Providing the security phrase to your wallet can mean losing all of the assets available on it.

If you receive direct messages from the founders of such projects, approach this with incredulity. The majority of NFT projects won't channel users directly through the likes of Discord or Telegram. Legitimate support teams typically respond in public channels rather than initiating direct messages. Scammers often create fake accounts that closely mimic official profiles, so always verify the identity of anyone claiming to offer support.

Pay Close Attention When Buying NFTs

Nobody wants to miss out on a potentially revolutionary idea. Blockchain technology or NFTs are of interest to many people because of this. Naturally, people also don't want to miss out on the proverbial next big thing. The fear of missing out (FOMO) is a powerful psychological driver that scammers actively exploit.

Crypto fortunes do exist. Scammers, however, are aware of just how many are hopeful that they will be the next to get rich. Scammers play upon these instincts and use various tricks to profit from those involved in the NFT marketplace. They create urgency, promise unrealistic returns, and leverage social proof to pressure potential victims into making hasty decisions.

You can certainly avoid scams. Always be cautious. Make purchases only when you are certain of the information. Secondly, make sure that you research the project thoroughly. Lastly, make sure that you maintain the security of your information. By following these principles and staying informed about common scam tactics, you can participate in the NFT market more safely and make better investment decisions.

FAQ

What are the seven most common types of NFT scams?

The seven most common NFT scams are fake markets, fake listings, fake tech support, fake giveaways, exit scams, counterfeit NFTs, and pump-and-dump schemes.

How to identify and avoid NFT rug pull scams?

Research the team's credibility and check community feedback on Reddit and Discord. Verify detailed roadmaps and trading volume. Scrutinize unrealistic promises and diversify investments. Avoid projects lacking official channels or transparency.

What is the difference between fraudulent NFT projects and legitimate ones? How should I identify them?

Legitimate NFT projects have transparent whitepapers, active development teams, and genuine community engagement. Fraudulent projects lack clear roadmaps, hide creator identities, and make unrealistic promises. Verify project authenticity by checking team credentials, transaction volume, and official communication channels before investing.

Can NFT fraud funds be recovered? What remedial measures are available?

NFT fraud recovery is extremely difficult due to blockchain's irreversible nature. However, you can file police reports, preserve evidence, and pursue legal action. Contact relevant authorities immediately and document all transaction details for potential investigation.

What information should you check before buying an NFT to ensure project authenticity?

Verify the team's background and social media history, review the whitepaper and roadmap, check blockchain transaction records on block explorers, examine multi-platform presence, and beware of common scams like rug pulls and pump-and-dumps.

How to identify and prevent NFT scams using fake official accounts?

Verify official accounts through verified badges and official websites. Avoid clicking suspicious links. Enable two-factor authentication. Check domain names carefully and confirm transactions only on official platforms.

What are common tactics used in NFT phishing websites and wallet theft scams?

Common tactics include fake NFT marketplace websites mimicking legitimate platforms, phishing emails with malicious links, and social engineering to trick users into revealing private keys or seed phrases. Scammers also create fraudulent Discord servers and impersonate official support teams to steal wallet credentials and NFT assets directly.