Crypto scams are nothing new
Blockchain-related activity isn’t any different. Illegal activities happen wherever a profit can be made. There are numerous reasons why NFTs are gaining momentum in the scam world.
1. Phishing Scams -
Some MetaMask users were targeted recently in a phishing scam that involved fake ads asking for their private wallet keys and their 12-word security phrase. It’s not the only attempt to obtain your security information, either. Fake NFT pop up scams are targeting Discord, Telegram and other public forums.
A phishing attack can get your personal information and drain your digital wallet. Just two days after tokens were issued, supporters were being targeted with a phishing scam. This type of scam drains all the money out of people's wallets. It worked by making use of a clickable link posted by the official Twitter account of the NFT projects. These fake accounts have all the same looks as the real account.
What should you do to be protected from such a scam?
Keep your private information private and never give out your passphrase! 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 any messages from your email.
2. NFT Pump and Dumps -
Pump-and-dump schemes refer to when a small or large group buys up NFTs or crypto currency, artificially driving the demand up. After they succeed, the scammers sell off when prices rise and leave others with no assets.
Unfortunately, pump-and-dump schemes have become somewhat predictable starting with crypto and now NFT markets. 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 fast. The price moves so quickly, the asset looks very attractive to naive traders who believe that the price will rise or that they have just landed an amazing deal.
One of the first NFT applications in 2017 was the Cryptokitties. These NFTs are on the Ethereum blockchain and are one of the most sought-after. Some cats sold for $155,000 worth of Ethereum. Nearly six months later the price dropped over 90%!
How do you avoid this scam?
Firstly, you should check their history and wallet records. Many NFT marketplaces like Opensea 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.
Also, make sure to follow the project on social media. Join their Twitter to verify the project. A project should have a lot of investors and collectors to ensure it has good liquidity, artistic value, and a long-lasting community.
3. Outbidding Scams - Bidding scams are the most common on 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. Always double check the currency and refuse to accept lower offers than you are willing to pay.
Always Do Your Own DD.