<p>The first-ever NFT was created in 2014 but till 2021, NFTs actually participated in the mainstream economic lexicon, whose ownership can cost up to millions of dollars. Owning an NFT not only means authenticity but also future financial growth. Like any investment, financial prosperity breeds opportunities, but also issues.</p><p>With such a huge money people pouring into, NFTs seem to be a fertile ground for scammers to thrive and update an array of fraud methods to seduce and deceive holders. And it is a fact that there are so many people who fell victim to these scams that the total loss is roughly $14 billion each year.&nbsp;</p><p dir="ltr">Just like the elephant in the room, crypto or NFT scams are nothing new. They are so common but we hardly protect ourselves from them because of the prosperous profit being masqueraded. That’s why a knowing trader should definitely equip themselves with <strong>common types of NFT scams and how to bring them to light</strong>.&nbsp;</p><h2><strong>Why do scammers target NFTs?</strong></h2><p dir="ltr">NFTs, maybe more than any other blockchain-based innovation, has managed to gain widespread acceptance. In 2021, there were over 280,000 buyers and sellers of NFTs, with approximately 185,000 unique wallets. Because many of them are new to the world of cryptocurrency, they are more likely to fall prey to scams.&nbsp;</p><h2><strong>Most common types of NFT scams and how to avoid them</strong></h2><h3><strong>Rug Pull</strong></h3><p dir="ltr"><strong>Rug pull</strong> is one of the most popular phenomena when mentioning NFT scams. Holders experience rug bull when they witness a startup or influencer promoting an NFT (or tokens, DAO projects) to solicit public investment, mostly via social media. After a certain amount of time, when everything seems to be settled, NFT’s associated people vanish with the money or cease updating about the project. This phenomenon is so ingenious that scammers also claim celebrity involvement to lure investors.&nbsp;</p><p dir="ltr">Most recently, at the end of March 2022, Frosties has been mentioned on the majority of crypto newspapers, magazines, and news channels for being a rug-pull project. After marketing and listing on popular marketplaces like Opensea, Ethan Nguyen and Andre Llacuna, 2 men associated with Frosties, stopped the project while transferring its funds to a series of different crypto wallets. As a result, the cartoon-like NFT collection vapored with $1.3 million making the Frosties owners bereft of promised profits while losing a certain amount of money.</p><p class="prosemirror-p-center"><img src="https://lh3.googleusercontent.com/5CRiwKTSP9LrLHcA1G9ZWcaPwNfSGtxp3XJxwC2pWomjxku7LAKfObz8HyLWj9xxxASJpbVkzdj5lo9ji3m9GPCpy6L-7OSZFvclyLFR_28HGw8PpHJ514PAxqpQ8j5vFah7KeFB84RkW9otrg" alt="Frosties rug pull scam" title="Frosties scam" width="624" height="365"></p><h4><strong>How to Avoid</strong></h4><p dir="ltr">Be wide awake! It is the most important reaction when it comes to evaluating an NFT collection. You will need to check the community for comprehensive insights. All rug-bull NFT projects tend to have large communities with nearly 100k followers, however, you can cling to this point and reflect the quality of those communities. It could be a tell-tale sign if the groups show low engagement despite many members.&nbsp;</p><p dir="ltr">Also, you should check the profile of the team behind that NFT collection. Checking is not just about reading their Linkedin, check the community followed them to see how much they engage with their users.&nbsp;</p><h3><strong>Phishing Scams</strong></h3><p dir="ltr">Phishing scams are more inclined to security aspects of NFTs rather than the subjective evaluation of an NFT collection. The NFT phishing scams ask their “prey” for their private wallet keys or 12-word security seed phrases via fraudulent adverts on fake websites and pop-ups. Scammers will hack into your wallet once they have your wallet's keys and deplete all of your crypto and NFT holdings.</p><h4><strong>How to Avoid</strong></h4><p dir="ltr">Security is always a problem regardless of being well-protected on Blockchain technology. You should pay much attention to wallet keys and security seed phrases and remember not to provide this to any form that is not original.</p><h3><strong>Wash trading</strong></h3><p dir="ltr">Wash trading has existed from the beginning of trading and economy for thousands of years. In that century-old scheme, it is called wash trading when the seller and buyer collude to make assets seem to be a lot attracted to outsiders and hence, get an exorbitant price after a certain transaction. In some cases, a person can play both the seller and buyer. On a larger fraud scale, there’s definitely a team in which each member has a specific character and role.&nbsp;</p><p dir="ltr">In the context of NFTs, wash-trading scammers remain their method to make NFTs more appealing by continuously selling and listing between separate accounts whose owner is the same person.&nbsp;</p><h4><strong>How to Avoid</strong></h4><p dir="ltr">Check the transaction history carefully before making any NFT purchase. Also, check the owner’s activities on marketplaces and social media as well. The killing point here is how careful you are in the process of evaluating.&nbsp;</p><h3><strong>NFT pump-and-dumps</strong></h3><p dir="ltr">Unfortunately, in crypto and now in the NFT markets, pump-and-dump strategies have become rather predictable. Pump-and-dump scam scheme is when a group of scammers buys NFTs in order to increase demand artificially. The fraud practice will continue till the assets get an increase in price then the scammers sell all their holdings leaving others with no assets.&nbsp;</p><p dir="ltr">Example: CryptoKitties was one of the original NFT applications. The Ethereum blockchain is where the NFTs are stored. These NFTs were extremely popular after their release in late 2017. One of the most valuable cats was sold for $155,000 in Ethereum. After six months, the prices had decreased by 95%.</p><h4><strong>How to Avoid</strong></h4><p dir="ltr">To begin, you should look at the project's history and wallet records. You can check the total number of transactions and buyers who have purchased NFT collections on OpenSea and any other NFT marketplace like Binance NFT.&nbsp;</p><p class="prosemirror-p-center"><img src="https://lh6.googleusercontent.com/UYL3X97czoaTyy4WCypVNfXK2kX9ABWyS-evvBpjGhzsfhwY-3KyKou__Gy3O1dydVNqoDxisMS-kCQA4NPxNr1RKzgUl3LEzxXuJ6OLaFpm96Y-m0EAIbnGozgr-o2m4bQQWd2mcihMOLu-Kw" alt="Binance NFT" title="Binance NFT" width="624" height="297"></p><p dir="ltr">Besides, you had better make sure to keep up with the project on social media as well. Join their Discord server and follow them on Twitter. To ensure strong liquidity, artistic value, and a long-lasting community, a project should have a large number of investors and collectors. This information is one of many factors to reflect good projects that potentially x100 in the future.&nbsp;</p><h3><strong>Counterfeit NFTs</strong></h3><p dir="ltr">Another type of NFT scam is Counterfeit NFTs. As this type of digital asset become more and more popular, there is an increasing number of reports of NFT thieves. These are great white lies when fraudsters steal an artist's digital work and post a fake version in an NFT marketplace where they are auctioned the way authentic NFTs are. Naive buyers will then purchase an NFT that is worthless after all.&nbsp;</p><p dir="ltr">Bored Ape Yacht Club is one of the most influential NFT projects in the world. For almost a year, it remained second to CryptoPunks in the supreme race of NFT collections of all time. Despite gaining a global level of reputation, BAYC is still a target of counterfeit NFT scams. On OpenSea - one of the <a href="https://www.builder.news/news/top-nft-marketplaces-to-find-and-sell-your-assets-sHYtp-9Jfqp-uMNfO-9tKCB-2Lnpk" alt="Top NFT marketplaces" title="Top NFT marketplaces to find and sell your assets" target="_blank" rel="" class="">top NFT marketplaces</a>, Phunky Ape Yacht Club has been copied almost 100% of BAYC. By conversing right to left of NFT’s side, Phunky NFTs were created to seduce careless investors to pour their money into assets that are not worth a penny.&nbsp;</p><p dir="ltr">The value of BAYC or any original NFTs is in their authenticity and uniqueness. What if your costly NFT can be found in another name, another marketplace with the same characteristics? Will you be able to remain the primary value you paid to own? This is considered to be one of the most common and serious fraudulence practices that anyone should be aware of.&nbsp;</p><p class="prosemirror-p-center"><img src="https://lh5.googleusercontent.com/xSczntjNA3zk8l5N2rwUFuZhwRU9mI2dLE4YZWIWWWVK9eyvB_UHggkB3jJPLEoJ1x3gG4YBElT0cZEdayHvj0h4hIVoRGHr2uWKPFVlnzGgClBNOkB3SedhNZeY0B1UfhwtgZq0Ul0CW6Rs0g" alt="NFT counterfeit" title="BAYC counterfeit" width="624" height="691"></p><h4><strong>How to Avoid</strong></h4><p dir="ltr">Although it is a serious fraud, preventing counterfeit NFTs is not rocket science. All you need to do before making a purchase on any marketplace is do your research thoroughly. On almost every prominent marketplace, authentic NFT collections are badged with a blue checkmark next to their name. You should keep your eye close to these collections instead of the ones that are cheap but without checkmarks just like the Phunky Ape Yacht Club above.&nbsp;</p><p dir="ltr">Also, the artist’s social channels also reveal important insight for you about whether their digital masterpieces are counterfeit or not. Verifying information you are skeptical about by asking questions directly to the creators and their communities is a great way to cross-check the authenticity.&nbsp;</p><h3><strong>Bidding scams</strong></h3><p dir="ltr">A bidding scam is nothing new. This situation will happen when a person wants to delist the NFTs after owning them. Bidders will take this opportunity to lure you with a different cryptocurrency that has a bigger value than the original one. Be cautious of this red flag, 5 BUSD is not the same as 5 BNB and so on.</p><h4><strong>How to Avoid</strong></h4><p dir="ltr">It’s easy. Check the cryptocurrency carefully before hitting the button.</p><h3><strong>Untrustworthy NFT influencers</strong></h3><p dir="ltr">NFTs' popularity has resulted in a slew of celebrity endorsements. These celebrities make money in a number of ways not only by promoting NFT collections but also by being founders or co-founders of the collection. Influencers or KOLs are often well-known for their effectiveness in transmitting information and somehow persuading their audience. It will be a positive message if the information is precise and harmless to receivers. However, some influencers have been reported to support scam NFT projects.&nbsp;</p><p dir="ltr">Almost every Youtube enthusiast knows famous but controversial twin brothers, Logan Paul and Jake Paul about their vlogs. In 2021, Logan and Jake launched and promoted respective NFT projects “CryptoZoo” and “Stick Dix” which after time marked a whopping decrease from its ATH.&nbsp;</p><h4><strong>How to Avoid</strong></h4><p dir="ltr">To prevent this fraud method, you should conduct proper research about the NFT collections claim influencers and KOL involvement. Also, have a self-evaluation of the influencers as well. Some influencers are getting famous in controversies, you will not want to “all in” in a project presented by one of these notorious characters. Look at KOLs of Crypto Punks, BAYC,... and have your own lessons.</p><h3><strong>Scam airdrops, giveaway</strong></h3><p dir="ltr">Scammers use social media to impersonate legal NFT trading platforms to advertise NFT giveaway schemes, often known as airdrop frauds. If you share their message and sign up on their website, the scammers will give you a free NFT. After getting access to your account, they prompt you to link your Metamask wallet credentials in order to claim your prize. During this time, they record what you enter and begin stealing your library of NFTs.</p><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11ecd75ea3909f6ea8e6023f659fee92.jpg" alt="Scam airdrops giveaways" title="Scam airdrops and giveaways" width="600" height="538" class="lykafe3"></p><h4><strong>How to Avoid</strong></h4><p dir="ltr">Verify the account's social media page and/or make sure the link supplied to you matches the URL of the NFT project.</p><p>For more articles like this, refer to <a href="https://www.builder.news/" alt="Builder.news" title="Builder.news" target="_blank" rel="" class="">Builder.news</a>.</p><div class="pr-block-special"><strong>Disclaimer:</strong><br>This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.</div>

Check out top NFT scams and how to spot them.

Top NFT scams and how to spot them