NFT Scams Are Everywhere. Here’s How You Can Avoid Them

AdobeStock_497874499-300x169Non-fungible tokens (NFTs) are quickly becoming one of the most popular digital assets online. An NFT is typically a unique piece of digital artwork that belongs exclusively to a single owner, with a blockchain-based digital ledger being used to record ownership. The NFT market surpassed $40 billion in 2021 and continues to grow in 2022. Unfortunately, as with any new technology, there are scammers who try to take advantage of this emerging market. If you are not certain about the legitimacy of a project, you can protect yourself and your business by getting legal advice about any digital asset you’re seeking to purchase.  Below are some examples of common NFT scams common in 2022.

1. Fake Websites and Social Media Accounts

Some scammers are able to replicate the website or social media channel of a legitimate NFT business. Often, these replicas are incredibly convincing, so it is important to use common sense security precautions before sending your crypto to buy an NFT or providing a website with any payment information. Check the website URL and verify it on the NFT marketplace. Confirm that social media channels are verified or are recognized on the company’s legitimate website. Look for security protection through antivirus software and other security protections on your network.

2. Fake Giveaways and Offers

Many scams focus on trying to get targets to enter their personal information on the scammer’s website. If you receive an email with a link to a giveaway, do not click on it. The link will likely take you to a scam page that is designed to steal your data. In other scams, you are required to enter your wallet information under the pretense of getting a free NFT. Although sharing your public wallet address is often safe, you should never (never, ever, ever!) share your private keys or your secret seed with anyone.  Scammers often try to access your wallet to steal NFTs or other digital assets stored in a wallet. Beware of any email, text, link, or AirDrop that prompts you to enter any personal data on an unverified website.

3. Fake Customer Support

Another common scam is a fake customer support page. If you are seeking help with your NFT, be sure that you are using the legitimate customer service page of an actual NFT provider. Some scammers will set up fake customer service accounts on communications apps like Discord or Telegram. Unsuspecting customers provide their account information to get “customer support,” which allows the scammer access to their digital wallets. Be sure to verify any company’s legitimate customer support account before providing any account information or personal data.

4. Replicas of Popular NFTs

Even if you don’t own an NFT, you can often download the identical digital file that the NFT owner can access, without ever owning or paying for the NFT.  Although this may sound counterintuitive, having access to the digital artwork by downloading the digital file does not give you ownership of the NFT.  The NFT’s ownership is logged in the digital ledger on the blockchain where the NFT was minted.  Scammers often download the digital files for the NFTs from the legitimate publisher of the NFT, and then re-mint new NFTs with those digital files and list them for sale.  However, the replica NFT that looks identical to the real NFT has no value.  Often the best way to verify an NFT’s legitimacy is by looking at on-chain data to confirm that the NFT is created by the legitimate publisher of the NFT.

Experienced Los Angeles Business Lawyers for All Your NFT Questions

If you are looking to buy a valuable NFT, verify that it is legitimate, or you are seeking to launch your own NFT project, the California corporate lawyers at Structure Law Group can help you navigate your venture with these new technologies.  Call (310) 818-7500 to schedule a consultation or contact us online.