Non-fungible tokens (NFTs) grew in popularity with the onset of the COVID-19 pandemic as art sellers and collectors rushed to the digital space to trade the one-of-a-kind digital assets. Over the last year or so, the NFT market has evolved considerably, and in the course of doing so, it has attracted more criminal activity. Early in 2022, for example, hackers stole $625 million from Sky Mavis, the company that produces Axie Infinity, one of the world’s most popular crypto/NFT games.
Smaller NFT scams are also prevalent with fraudsters posing as people other than themselves online in hopes of stealing money from unsuspecting NFT collectors and enthusiasts. Below are three of the most common scams.
Rug Pull Scams
Rug pull scams involve criminals promoting fake NFT projects that seem legitimate. Creators of most NFT projects usually offer a roadmap of their goals and how they intend to drive up the value of the NFTs. Some, however, might offer minimal information in this regard or pull all of their social media accounts and disappear with the NFT mint funds, leaving collectors with an NFT that has immediately lost value.
In July, the United States Department of Justice charged six people involved in an NFT trading scam, one of whom stole $2.6 million from investors through a rug pull scam.
You can avoid rug pull scams by purchasing NFTs exclusively on verified trading platforms or using security tools like rug pull detection and blockchain explorers.
Fake NFT Offers
Scammers also utilize email to try to swindle individuals with fake NFT offers. These phishing emails usually promise deals that seem too good to be true and involve an embedded link that takes the user to a fraudulent NFT marketplace. These fake websites are often equipped with malware like keylogging or other types of spyware that allows the sender to steal the user’s information and NFTs.
Airdrop Scams
In addition to email, scammers will often use social media to target victims. Fraudulent NFT giveaway campaigns, also known as airdrop scams, are common on social media platforms. Scammers will message individuals with a promise to give them a free NFT if they sign up on their website and promote their message. The catch is that they’ll need the user’s cryptocurrency wallet information to award the prize.
Once a scammer has this information, they can gain access to the owner’s account and steal their entire library of NFTs. The best way to protect against airdrop scams is to avoid interacting with unverified accounts.