The interest in NFTs has spiked over the past few weeks, with various Crypto ‘personalities’ finally sitting up to take notice of a niche industry which, until now, has been left largely undisturbed to steadily grow in a quiet corner whilst it creates a tech robust enough to change the world.
But why the sudden interest in NFTs? That ones easy.
The promises of a newly discovered gold mine which goes by ‘Crypto Art’ was being heavily shilled by popular accounts right across Twitter and beyond.
Covertly promoted as a ‘new fountain of wealth’ to a swarm of failing Crypto traders, Crypto Twitter has been relentlessly announcing the emergence of a mystical niche where there is an insatiable appetite from a growing number of collectors who are all desperate to buy (what appear to the untrained eye) as simple JPEGs…. for 5 or 6 $USD figure sums. Enough to wet any scammers appetite.
Even better, if you have the nouse to animate, then this is the same wonderland that animated GIFs are adored and admired as if they were newly discovered relics from an ancient Egyptian tomb from 5000 years ago, and therefore priced as such, if not higher. And they sell out within seconds.
But don’t worry, these are limited edition, scarce pieces of art, and by design they can never be copied or faked…or can they? (The answer is that they can only be imitated, but never copied).
Scammer: Challenge accepted.
Growth is always welcome in any niche community, but it does bring with it a new set of challenges, especially when it happens in such a short space of time.
This wave of new interest has largely come from the Crypto community, which is delightful in many ways, full of bright minds and motivated characters fighting for genuine change. However, it does have a dark side. An underground army who permanently live in their pajamas and operate from keyboards covered in cheese puff dust existing purely to scam, fake, hack, forge, blackmail etc. The normal man goes fishing, they go phishing… that type.
Unluckily for our beloved NFT community, judging by the recent rapid increase in sophisticated scams, it seems fair to suggest that a few of these unsavoury sorts boarded the hype train to NFT town, and as a result have brought with them a flurry of fresh ways to sneakily part you from your valuable digital assets and crypto, sometimes without you even realising it.
In this article we have a look at a selection of trending scams from recent weeks, how you can avoid them and finally the effects this could have on the long term credibility of the NFT industry. Feel free to add any experiences in the comments below.
Shakers and Fakers
Not including the major Blue Kirby rug pull which was both DeFi and NFT related, here’s a run down of some recent NFT scams that you should be aware of in order to help you avoid being the next victim.
1) Fake Cloned Discord Accounts
An industry wide issue, this one seems to never get old among scammers, nor has Discord come up with a way to fix it. A scammer simply creates an account with the exact same name and profile image as an admin, or someone with a good community reputation, then starts to send private messages pretending to be them, which inevitably culminates in them asking you to send some crypto. DO NOT send it to them.
How to avoid: Check previous conversation threads. Never give away crypto. Send a friend request to your most trusted Discord buddies today.
2) Fake NFTs
Did you hear about the fake Wrapped Crypto Punks debacle? The images of CryptoPunks were just copied and minted as NFTs to appear exactly the same as the real deal, by an account named WrappedCryptoPunks on the Rarible marketplace.
What made this so difficult to spot was the fact that ‘Wrapped’ CryptoPunks were a new concept, and the only way to recognise a fake was by the collection they were in. Even more sneaky is that the scammer sold the fake NFTs for prices similar to the real CryptoPunks, so they seamlessly blended in. Shame on Rarible.com for taking around 3 weeks to remove the scammers fake WrappedCryptoPunks account, even after it was reported multiple times.
NFT imitations are one of the biggest problems from scammers at the moment, and its getting worse. Many other NFT projects e.g. Aavegotchi Raffle tickets on Opensea. In this case, the scammer bought 1 or 2 genuine NFTs, minted some fake ones, then bundled them all together to sell as one. Luckily these were removed within 24 hours. Good job Opensea!
How to avoid: Be extra vigilant. Check the sellers contract address. Check the author. Check that the seller is marked as verified on the marketplace. Check the sellers sales history.
Source: Above image used for example purposes only. Source rarible.com
3) Fake Artists
A relatively new scam. An influential artist from another social platform e.g. Instagram, usually with little to no presence on Twitter, will have an account dishonestly created for them by a scammer who will then proceed to outreach, form relationships and tokenize the unwitting victims art so they can sell it as an NFT and profit themselves.
How to avoid: Google search the artist and check all their other social platforms for announcements of an upcoming NFT sale to check its legitimacy. Artists will often announce an NFT sale prior to it starting, along with the legitimate marketplace, start time and date. Authentic artists will often get themselves verified by an NFT marketplace prior to selling.
4) Fake Drops
Why clone the odd piece of NFT art when you can fake a whole drop? That’s what happened last week when a scammer on Twitter tried to fake a whole new Beeple drop on Rarible, just a day or 2 after the official sale. Luckily, this time Rarible were a bit sharper and removed the account within 1 hour. It is unclear how much the scammer sold in that time, but the flawed nature of art drops would suggest he/she probably got a payday.
How to avoid: Do a thorough research of all the artists social media profiles and look out for tell tale signs such as follower numbers, engagement, announcements on other social media platforms. Do not just rely on Twitter. If a deal seems too good to be true, it probably is.
5) Fake Verification
This is where the small icon (usually a small tick in a box) is copied and pasted onto the profile image of a scam account, so it looks verified and genuine.
How to avoid: If you look closely you can tell the verification mark has been photoshopped in. This is an easy one to avoid.
Source: Above image created for example purposes only.
6) Fake Loans
This audacious scam was recently run through Telegram in which a 33 ETH fake loan was conjured up in an attempt to part an OG NFT investor from their Decentraland estate. This time, the scammer chose the wrong collector to mess with and was exposed, but others should be mindful of similar attempts at fraud. This is an early warning to NFTfi that it needs to do more to secure up it’s platform.
How to avoid: Always use the correct channels put in place when transferring crypto. Always be wary of OTC transactions where no escrow service is involved.
7) Fake Bids
The most recent idea scammers have conjured up is to place bids for NFTs in alternative currencies. e.g. An NFT is listed for 3.5 Ethereum, scammers are now attempting to catch out sleepy sellers by bidding a similar numerical amount, but in USDC. An easy one to notice if you’ve just had your morning coffee, not so much if you’re accepting bids at 3am on a saturday night. In the example below, the scammer even took it one step further by copying the username of a prolific NFT investor. These scammers clearly have zero scruples.
How to avoid: Check the currency time and time again. The adjacent currency logo is also a giveaway. Read your email alerts carefully. Click on the buyer name and investigate their recent activity.
NFT Marketplace Obligations & Education
This recent wave of scams is a warning shot at the NFT industry. A warning to be better prepared and tighten up our practices.
These scams have not only highlighted some weaknesses we have within the industry, but more importantly they have accentuated the responsibilities and obligations of the NFT marketplaces who have positioned themselves as the gatekeepers to new investors coming into NFTs. Marketplaces now have a duty of care to protect the industry as the first line of defense against bad actors.
It is the Raribles, Openseas, Superares and other marketplaces who now need to be using the fees we pay to start to reinvest in eradicating these small loopholes which scammers have quickly identified, and are in some cases still exploiting. They also need to be investing in second guessing their next line of attack. Don’t get me wrong, in some areas they are doing a fantastic job, but there is always room for improvement.
On a more general level, NFT marketplaces must keep improving. If there is something that needs fixing, then fix it asap. A bit unrelated, but e.g. the Nifty Gateway art drops selling out in 1 second is clearly a problem, yet it seems relatively little is being done to block the bots which are stealing the rights of ordinary investors to have an equal opportunity to buy some art at a reasonable price. Sort it out NG!
The responsibility also lies with us as NFT investors and collectors to educate ourselves and start adopting better practices when buying and selling NFTs. Stop giving away crypto to strangers, start questioning if something is too good to be true or not. DYOR. Remember, if it wasn’t profitable, scammers would stop scamming, or at least move onto easier targets.
Finally, it goes without saying that the exposure Crypto Art has created for NFTs has been the perfect stepping stone to help the masses start to understand how NFTs can improve systems and infrastructure, most of which have been in place for decades.
The use cases are almost endless, and it is exciting to see where they will next be applied. We just have to protect their integrity, with everything we can.
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