CloneX COO NikGopalani and prominent NFT collector CryptoNovo311 recently lost NFTs estimated to have been worth hundreds of thousands of dollars to scammers. As scams become more frequent, here's a look at some common NFT scams and how to avoid them:
involving phony advertisements that asked for users’ private wallet keys or 12-word security seed phrases . There are also fake malicious pop-ups operating via Discord, Telegram and other public forums that link to normal-looking login pages, such as MetaMask or other popular websites.
If a bad actor gets a hold of your private information through a phishing attempt, they can drain all of the crypto in your digital wallet.As a general rule of thumb, you will only need your seed phrase when creating a hardware backup of your crypto wallet or when recovering your wallet. Never enter information into the MetaMask pop-up, or any other pop-up while you’re at it. Always go directly to the verified website for any crypto transactions, never using links, pop-ups or your email to enter your information. Write your seed phrase down on paper, and never give it out to anyone – don’tBecause NFT sales happen virtually, and all marketing is done on social media, it’s easy to get catfished. Popular NFT communities commonly hire influencers and celebrities to promote them, making it difficult to tell which ones are real or not.If you ever receive a direct message from someone who claims to be a founder, celebrity or influencer, don’t respond. It’s commonly known etiquette in the NFT world that C-level staff will never DM you unless you send them a message first or you come to a specific agreement in a public Twitter thread or Discord channel. It’s kind of like when you were young and your parents told you never to give information to a telemarketer who called your house. The same thing applies in the NFT world – if someone DMs you first, don’t click links or reveal any secrets.Pump-and-dump schemes are unfortunately becoming somewhat predictable in the crypto and NFT worlds. The term refers to when a group of people buys up a bunch of NFTs or currency and artificially drives demand way up. Once they are successful, the schemers cash out when prices are high and leave those who weren’t in on it behind with worthless assets. Similarly, you may also have heard of “paper money” in reference to NFT projects that aren’t technically scams but have limited liquidity thanks to a handful of aggressive buyers. “When you have 5,000 NFTs that are being controlled by 20 of the top collectors and none of them have any pressure whatsoever to sell, essentially anyone who wants to buy into that collection has to buy in at a very high floor price,” said a pseudonymous NFT collector known as , who owns over 400,000 NFTs. If you’re buying NFTs as an investment, odds are better when the project has more buyers and therefore more liquidity.Check the history and wallet records of whatever project you’re interested in. This is where blockchain’s transparency comes in super handy. On OpenSea or any NFT marketplace, view the number of transactions and buyers for the NFT collection. With, you can see all incoming or outgoing transactions that happen on the Ethereum blockchain. Also, follow the project on Twitter and join its Discord channel. For a project to have good liquidity and/or lasting community or artistic value, there should be a good number of engaged investors and collectors, plus an active community where people talk, engage and share information.Bidding scams happen mostly in the secondary market after you’ve purchased your NFT and you want to resell it to the highest bidder. Once you list your NFT for sale, bidders might switch up the cryptocurrency used without telling you. Instead of receiving 5 ETH for your favorite NFT, you could get $5.Double-check the currency used and never accept a lower bid than what you want.It’s worth remembering that minting a piece of artwork as an NFT is not the same as having intellectual property ownership of it. Thanks to OpenSea’s beginner-friendly software, anyone can turn any photo or image into an NFT whether or not they own the rights to that IP. Scammers and bad actors could easily steal an artist’s work and open a fake OpenSea account where they list counterfeit artwork for auction. This would make your NFT essentially valueless once the community finds out what that scammer is up to – and there’s no way to get your money back.Before buying an NFT from any marketplace, do your research to make sure the artwork you are buying is from a verified account. Look for the blue check mark next to the artist’s profile picture on OpenSea or other NFT marketplaces. If there is none, find the artist on Twitter or through their website or other social media channels. Ask them directly if the artwork you want to buy is theirs, and if you have the right user profile. Also, see if the artist or NFT project has a Discord channel and ask others in the community. Watch out for counterfeit blue checks. A true verified account shows a blue check on the border of the profile image, not on the inside. See this example from an
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