Why do people get scammed in NFTs?
People can be scammed in many ways. From fake links and trades going wrong, to copycat collections and rug pulls, scammers will always find a way to ruin someone’s day by stealing NFTs or money (whether in crypto or fiat). A range of these scams have been reported in recent times on Twitter, and regrettably, once a scam has happened, there is not a lot that the victim can do to retrieve lost funds.
One of the most common scams utilises a bad link that tricks users into sharing their wallets with the wrong people. Classified as a phishing scam, these could also be worded as “trades going wrong.” In these types of scams, a hacker or scammer will create a near-identical website to an NFT trading platform like “NFT Trade” and ask their victim to input their Metamask details so that they gain access to their wallet. In the case of Twitter user @shanterpster, they had their Bored Ape Yacht Club NFT (#8933) stolen in December as a hacker pretended to be using the real NFTTrader platform to complete the trade. It wasn’t announced by the victim what they were offered in exchange for their ape, but it was something that the hacker didn’t own. Based on the market value at the time, the victim lost out on $281,000. Their reaction on Twitter to the scam was simple: “just got scammed.” You may be wondering how someone could fall for something like this, but the changes are subtle and often hard to spot.. For example, a scammer will change one character in the domain name, like an ‘l’ (the letter L) for a ‘1’ (the number one).
What made this rug pull so bizarre was that there were videos on the project’s social media pages of the purported founders–late teen/early twenties males. It was only announced afterwards that their “team” was actually a troupe of paid actors. In a brazen Tweet that was taken down but captured on screenshot, they gloated: “All it took was a few paid actors and boom we did it again” referring to their previous rug, Doodled Dragons. “Y’all really believe anything these days.” During the hype, prices were at 2-3 SOL (200-300 USD). Then this scam saw the prices of the NFTs on the secondary market suddenly drop way below the mint price of 1 SOL. The project was later “de-rugged” by the Magic Eden, raising the price of the NFTs back to their previous highs. The marketplace also offered 5,000 SOL (over 420,000 USD at the time) from their treasury to fund the roadmap.
Twitter is the primary social media platform, alongside Discord, where people in the NFT community congregate and discuss the latest projects, the struggles, and the joy that they experience in the space. Unfortunately, as with everything, there are some negatives to the vast amount of “NFT people” on the platform. Alongside the positive and communal aspects of crypto Twitter come many bots trying to sell ‘low-quality’ NFTs or trick people into clicking fake links posing as reputable projects. Recently, there has been a scam circulating on Twitter around Yuga Labs’ Otherside metaverse. A fake account that has bought engagement with thousands of bots tags thousands of people in comment sections, encouraging them to click a fake link. The real link to the Otherside website is Otherside(dot)xyz, whereas the bots have been guiding people to otherside-metaverse(dot)com, a scam link.
This is downright disgusting. This is why NFTs get such a bad rep. It's like a wild west out there, unless a massive change where all projects have to be audited and verified as a REQUIREMENT, wont stop these greedy people from hurting others#balloonsville #rug #scam #SolanaNFT pic.twitter.com/toUHiHL2bk— Lord Skywalker (@skywalker69_sol) February 6, 2022
While it remains difficult to stop the Twitter bot scams and copycat collections completely, there are ways to reduce the risk of falling for certain types of scams like bad links and trades gone wrong. Firstly, you should consider that the best protection against hackers and scams in the NFT space is quite simply skepticism and good judgement. That said, here are some clear things you can do to protect yourself:
Holders of valuable NFTs should consider using a cold wallet to store their tokens. By definition, a cold wallet is a physical device that keeps your cryptocurrency (and NFTs) completely offline. By contrast, a hot wallet, like MetaMask or Coinbase Wallet, puts you at added risk of being scammed. A solid example of a cold wallet company is Ledger, the industry leader. Their products include the Ledger Nano S and Nano X. Cold wallets can still be hacked, but the risk relies on IRL theft instead of online activity.
Oh the spam is terrible! We’re doing everything we can to contain it. Lots of bad actors doing their play. This wasn’t project criticism (which is of course valid) so much as gatekeeping which projects deserve recognition or success.— Justin Mezzell (🥃,🦉) (@JustinMezzell) April 19, 2022
Finally, Chainabuse is an important resource that has been created for people to report scams or hacks. On their site, there are a large number of reports on scams happening across several blockchains, including Ethereum, Bitcoin and Solana. These reports include NFT-related scams.
As long as the NFT space has profit-making potential, scammers will be on the hunt for easy marks. Therefore, holders of non-fungible tokens and cryptocurrency should safeguard their assets by watching out for bad links and using a cold wallet. Taking your finances into your own hands is empowering, but with the great power of decentralisation comes great responsibility.
Ross Wardrop is a multimedia journalist based out of Glasgow, Scotland, with a current focus on NFT news and feature writing, which he's worked on in the past 12 months. He also has a massive passion for sports, specifically basketball and football (soccer). You can find him on Twitter @RossWardrop, on Instagram @rwardrop_, and on Linkedin here.
SuperRare editor Oli Scialdone considers the social experience of provenance and its relationship with community in the Web3 space.