NFT: watch out for scams

The NFT market started to pick up speed in 2020, grew over 300% from the previous year and represents cryptocurrency for millions of dollars. During the first week of May 2022, sales of these tokens then fell by 92% compared to September last year. However, the market still generates the equivalent of millions of dollars, giving rise to many concerns about the safety of this asset. If a thief previously had to break through the security of a museum to steal a work of art, one can gain access to a digital wallet using malware or social engineering.

When digital artist Qing Han died in 2020, scammers took the opportunity to sell his artwork as NFT in his name. Last September, famed graffiti artist Banksy got his website hacked, posting an ad for the sale of what was to be his first NFT; a collector paid $ 336,000. The NFT market opens up opportunities for many scams:

Discord Scams: The chat platform is divided into communities called servers where people can talk, stream and play games together. In December last year alone, 373 members of a Discord server powered by gaming marketplace NFT had their digital wallet authentication compromised, losing a total of $ 150,000. Another scam on Discord involves shipping DM by making users believe that they are in fact being contacted by a brand, an artist or an influencer. Do not be surprised by NFT projects without having confirmed that the offer is legitimate.

Fake social media profiles: Beware of potential fake profiles. Often these are copies of real profiles and you only need to look a little closely at the details to distinguish the fake from the real one. You should also be wary of bots that invite users to respond to messages; use social media to interact with them and request information that could give them access to cryptocurrencies.

Phishing scams: Replica NFT marketplaces or fake crypto wallets are being shared on Discord, Twitter and forums as well as via email. The degree of resemblance to real companies is impressive, and it takes a keen eye to see small differences in the URL or overall layout.

Imitation artist: In addition to Banksy and his fraudulent website, other artists have been through similar situations. Tyler Hobbs, the artist behind the Art Blocks project “Fidenza”, has condemned the SolBlocks platform for using his code to sell replicas of his works. Derek Laufman’s artwork was also sold by a fake account with the artist’s name, and even got a confirmed icon.

Pump and dump scams: The type of scam that is closer to NFT speculation involves a person or group of individuals buying a large number of NFTs (or cryptocurrencies) and reselling them to artificially create a false impression that the asset is in strong demand. . In this way, market forces will increase profits from resale. On the buyer side, this pattern seems to be validated by influencers sharing NFT on their profiles, making it a great option. Ultimately, these buyers expect to resell at a higher price, which never happens.

“Pulled carpet” scam: The scammers promote a project, request investment and abandon it without notice. This usually happens when they think they have “completely exhausted investors”, remove all funds from an NFT wallet and delete their profiles from markets and social media.

Auction fraud: Fake NFT auctions are one of the most common scams. These occur when a real seller is trying to auction off an NFT. The seller indicates the cryptocurrency in which they want to be paid, but a scammer can successfully change the currency of their offer to a currency of lower value. It can also work by adding and removing an NFT listing from a market, by moving the decimal number one to the right. Without noticing the change, a buyer may end up paying much more than the originally planned amount.

Hacking on social media: Fake offers and giveaways are a great way to pique user interest. Surprisingly, they can even come from well-established user accounts. The reality, however, is that these accounts have quite often been hijacked by scammers to promote fraudulent schemes. When a user tries to access the fake offer, they are asked to enter their password or personal information, provide their contact information and get nothing in return.

Counterfeit coins: In these schemes, scammers drop NFTs in influencers’ wallets, making it look as if the celebrities had actually imprinted the NFTs on the blockchain. In fact, many buyers are monitoring specific portfolios for new activity to anticipate mass interest and an increase in the value of an NFT. According to OpenSea, the largest NFT marketplace, more than 80% of the NFTs created for free on its platform are fake, plagiarized by other artists or spam.

There are plenty of scams you need to be aware of when diving into the NFT world, and as usual scammers never pass up an opportunity to make money. It is therefore important to always pay attention.

Benoit Grunemwald (ESET)

Image credit: DR
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