To the moon or longkang: How to avoid NFT scams

By now, most of us would have heard of Non-Fungible Tokens (NFTs), with the likes of Snoop Dogg, Shawn Mendes and even many Singaporean artists who have launched their own NFT collections.

But with soooo many NFTs out there, it can be hard to identify what’s legit and what are potential NFT scams, especially for those who are relatively new to the NFT space.

So here are some ways to tell if an NFT collection is legitimate or a potential scam.

TL;DR: How to avoid NFT scams

1. Check if the creators behind the collection are doxxed
2. Read up on the NFT’s roadmap
3. Check transactions
4. Cross-check the NFT project price on official trading platforms
5. Check out the community
6. Do not respond to DMs
7. Beware of “airdrops” or “giveaways”

In essence, always be ultra-cautious before making an NFT purchase. Treat everyone as a potential scammer unless proven otherwise.

Most importantly, remember that project teams or any official members within the cryptocurrency and NFT space will never send you a direct message (DM) first. So do not respond to these messages and never divulge any important information like your seed phrase to anyone.

1. Check if the creators behind the collection are doxxed

Just like how most of us put our trust in big brands like Apple, Samsung, Microsoft and their leaders, it is also important for us to trust the people behind any NFT collection that you’re interested in.

Remember, you are putting your money to back the person behind the NFT and their ability to bring their project to fruition.

For the uninitiated, doxxing refers to the act of publishing private information online and it can be an indicator of whether an NFT is a scam.

But wait…

Why would anyone intentionally divulge such information?

Well, NFT creators may undergo doxxing to show some level of accountability in the case of a rug pull. This means that the public can look for said person in the event that a scam does occur.

Be that as it may, many NFT scammers have also made use of doxxing as a tool to fake accountability. They may steal someone else’s identity for instance just so they can label themselves as a “doxxed” creator.

So take this indicator with a pinch of salt.

2. Read up on the NFT’s road map

If you’re familiar with games or companies that release road maps of what’s to come in the future, you’ll know that this is a set of “promises” that they will deliver.

Similarly, NFT projects that have a solid road map with steps on how they will achieve an objective will be seen as more legitimate than a project with no road map at all.

That said, you need to look out for road maps that are “all talk” but do not have concrete plans on how they are going to achieve their goals.

Remember that one person in your project group that talks a lot of c*ck but doesn’t actually do anything? Yep, same concept here.

ALSO READ: NFT marketplace Cent suspends most sales, citing 'rampant' fakes and plagiarism

3. Check transactions

Before you enter an NFT project, it is also good to check the transaction volume.

If there is little to no transaction volume, this could be a sign of a failed project or even a potential rug pull.

To safeguard yourself further, you can also check the transactions that have occurred. Look at the history and wallet records of the NFT project on OpenSea or other NFT marketplaces.

By doing this, you can see who is buying what and whether there is enough liquidity should you want to cash out in the future.

Moreover, you can also identify if the project is a ‘pump and dump’ scheme where prices are artificially inflated and the scammers make multiple bids in a day to fake popularity.

4. Cross-check the NFT project price on official trading platforms

Before making a purchase, remember to cross-check the project price on official trading platforms such as OpenSea, Magic Eden, or Mintable. If the price is much lower than what’s listed, it is most likely a scam.

Moreover, if you are selling an NFT, make sure to double-check the cryptocurrency you are trading in as there have been incidents where scammers swap the transaction cryptocurrencies for something that is worth much less.

5. Check out the community

While doing your research on an NFT project, it is also imperative to at least check out the NFT project’s community.

A good NFT project will most likely have a positive outlook amongst its community on various platforms such as Discord, Twitter, YouTube and so on. A solid community will also be able to provide you with answers to your questions about the project and have a strong engagement on social media.

On the other hand, if you see a community that doesn’t have genuine conversations, ie. bots on discord spamming the general chat, it is a huge red flag and you should most probably avoid it.

ALSO READ: OnlyFans jumps into NFT profile pictures

6. Do not respond to DMs

If you’ve joined a community, it is a good idea to turn off your Discord DMs as official moderators, creators or anyone from the project team will never send you a DM first.

Discord hacks have become increasingly prominent where hackers gain administrator privileges to servers and either give out deals that are too good to be true or send you a DM requesting for personal information before providing help.

This is also the same for Telegram groups where users ask a question and start receiving plenty of DMs from so-called admins.

Thus, make sure that you only respond to verified personnel and only click on official links from dedicated channels that most NFT projects would have.

7. Beware of “airdrops” or “giveaways”

If something is too good to be true, it most probably is. In the crypto world, such scams are common where you would get an “airdrop” or encounter a “giveaway” from what is posing as a reputable company.

These could come in an email such as this:

As seen above, the email seems to be from the popular MetaMask wallet. However, a Web3 wallet should not know your seed phrase, much less your email.

Hence, it is crucial to always check the sender’s address and what details are requested.

Moreover, some scams involve “giveaways” where the scammers might give you a free NFT in exchange for signing up on their website or signing in to a fake marketplace.

They would then steal your login credentials using keylogging software or other types of spyware and try to access your wallet.

NFT scam prevention tips

All in all, always be sceptical about the people you interact with online, especially when they are the ones reaching out to you first.

Never give out your seed/recovery phrase and always verify the people that you are interacting with. Like most things finance, be sure to do your own thorough research before pulling the trigger.

As a bonus, you can follow accounts such as @rugpullfinder.io which helps the NFT community by finding out which projects are potential scams.

Interested to find out more about cryptocurrencies and NFTs? Learn from the experts, Jacky Yap from Chained Debrief and Arthur Cheong from Defiance Capital at the Seedly Personal Finance Festival 2022!

Happening from April 23 - 24, 2022, learn how to manage your finances from finance experts from the comfort of your home and continue to have access to live recordings up to 30 days after. Get your tickets now!

This article was first published in Seedly.