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4 NFT Scams Newcomers Should Be Aware Of


In mid-July, Verified Market Reports said the global NFT market had reached nearly $11.32 billion and was on track to reach $232 billion by 2030. With so much money changing hands, one thing is certain: you can count on criminals to try and steal as many as humanly possible.

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In early 2022, Rolling Stone reported that “NFT scams are everywhere” and the smart move is to “assume everyone is a scammer until proven guilty”.

Rolling Stone was actually late for the game. Industry insiders have been warning NFT traders about the prevalence of digital fraud since the dawn of the blockchain industry.

If you’re dabbling in NFTs or thinking about getting in on the action, these are the most common scams you need to watch out for.

The old pump and dump stock scam is now called the rug draw

Alternatively known as “pump and dump” – a fraud with a long history in the stock market – the mat scam is a trap in which crypto developers lure early investors with misleading information about the potential for a nascent NFT project. When the price of NFT hits a certain ceiling, developers siphon off all the money from the ecosystem and disappear.

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Carpet pullers sometimes use social media influencers to lure victims. In January, CNBC reported that investors had filed a class action lawsuit accusing Floyd Mayweather and Kim Kardashian of artificially inflating the price of a cryptocurrency called EthereumMax – which is not affiliated with Ethereum – and letting investors with worthless crypto.

According to NFT Now, regulators keep NFT projects on par with real estate, stocks, or any other investment. In the digital world, like on Wall Street, it is illegal to solicit funds for an investment project and then abandon it without reimbursing the investors, keeping the money for yourself.

According to Chainalysis, rug-pulling scams are the bane of the industry, draining $2.8 billion worth of crypto and accounting for 37% of all crypto scam revenue in 2021, compared to just 1% in 2020.

Take a long, in-depth look at any NFT airdrop you receive

On September 21, 2021, a Twitter user with the handle @babbler_dabbler tweeted that criminals raided his digital wallet and stole Damien Hirst’s “The Currency”, an NFT that was worth over $41,000 at the time.

According to Blockcast, @babbler_dabbler fell victim to an airdrop scam, a type of scam that emerged from the DeFi realm and is now common in the NFT world.

In this type of scam, users will receive tokens in their wallet that they have never heard of and have not requested, often ending in .io.

There is nothing inherently suspicious about this. According to CoinTelegraph, unsolicited airdrops are an essential tool for NFT marketing and promotion that legitimate producers use all the time for non-nefarious purposes.

In the case of airdrop scams, however, users are redirected to a third-party website when attempting to collect their NFTs or exchange them for crypto. There they are jostled through a series of security/password recovery phrases that they must go through before they can collect their prize. This is the time when victims inadvertently let criminals into their wallets.

Remember the phishing scams? They are back

Phishing has more than a quarter century of history, dating back to when the Usenet newsgroup AOHell coined the term on January 2, 1996, according to Phishing.org. It has always been tied to email, but scammers have updated the classic scam for the blockchain era.

In November 2021, Check Point Research reported phishing scams that stole nearly half a million dollars from the wallets of victims who the criminals duped with fake search engine advertisements that appeared to point to sites legitimate.

Much like email phishing, NFT scammers tend to impersonate the biggest and most credible players in the industry, such as Phantom and MetaMask. When brands click on an advertisement, the link directs them to a fake site that poses as legitimate sites where they would go to download digital wallets like Metamask or exchange currencies on platforms like Uniswap or PancakeSwap.

Once at the impostor’s site, victims are prompted to enter their private wallet keys or 12-word passphrases – a major red flag that should always raise suspicion – opening the door to digital theft.

April Fool’s Day – They Hacked Discord Bots

Like so many similar platforms, the social messaging site Discord uses helpful artificial intelligence entities called bots to perform tasks such as greeting users, banning troublemakers, and moderating chats.

In April, NFT Now reported that hackers had hacked into the Discord servers of Nyoki Club, Bored Ape Yacht Club, and other popular NFT communities. Fittingly, the attack took place on April Fool’s Day.

Hackers commandeered bots from communities and used them to trick users into clicking on malicious links that would have led to new NFTs with exclusive rewards. However, NFTs never existed and messages linked to phishing sites where buyers paid – tens of thousands of dollars, in some cases – for non-existent tokens.

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This article originally appeared on GOBankingRates.com: 4 NFT Scams Newcomers Should Be Aware Of

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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