Ever since alternative and digital forms of currency have exploded onto the investment market, there has been a huge increase in investment into non-fungible tokens (NFTs.) Unfortunately, because NFTs are very new, this has also led to a huge number of scams and a rise in NFT fraud. Because some NFTs can be very profitable and worth millions of dollars, it has become an extremely lucrative and attractive investment type, especially to early technology adopters. However, this has also meant that it’s easier for scammers to entice people into NFT fraud and scams. Vulnerable investors who are simply looking to expand their portfolio into the new world of NFTs may unfortunately find themselves being enticed by NFT fraud and scams.
Here at WRS, our team of lawyers and legal experts are on hand to help you recover your funds and/or digital assets if you fall victim to NFT fraud and scams. We can also help you if you have lost your funds through regulated brokers. If you’re struggling with NFT fraud and think you could have been scammed, please contact us today to see if we could help.
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NFT stands for ‘non-fungible token.’ They are a form of digital currency and/or asset, which are a lot like cryptocurrency. However, NFTs differ from cryptocurrencies because they aren’t interchangeable, meaning that NFTs are all completely unique. NFTs are easily verifiable, and often take the form of digital media, such as images, artwork, music albums, videos and GIFs. Buying an NFT is like investing in a piece of art, only in digital form. Theoretically speaking, almost anything online can be purchased as an NFT. NFT fraud and scams are very common because of how popular they have become as a potential digital investment.
NFTs use unique blockchain technology so they can be easily tracked. Each NFT has a unique code called ‘smart contracts’ and is stored on the Ethereum blockchain, which is accessible by the public. However, the rapid uptake in the purchase of NFTs, combined with the fact that little is understood about them by the majority of people, means that NFT fraud and scams are now very common and are increasing at an alarming rate. In order to avoid NFT fraud and scams, you should ensure that you do your due diligence to verify the validity of the investment, particularly if you are a new investor in digital assets.
Most valid NFTs can be traced back to the public blockchain, to provide investors with a chain of authentication. However, this also means that it is easy to fall victim to NFT fraud and scams, as you might not be able to recover the NFT once it has been stolen, even if you are the rightful owner.
In order to avoid NFT fraud and scams, you will need to be careful and do your due diligence to avoid common scams. For example, when you start your NFT trading portfolio, you should only use your ‘seed phrase’ – refrain from using your email address and personal information. Never compromise your personal information into pop-ups – ensure that you are trading through a verifiable website. There are many different types of NFT fraud and scams, and making yourself familiar with common signs of scams will help you protect yourself when you’re trading digital assets.
The most common signs of NFT Fraud and Scams are:
It is very easy to use a fake persona and scam people out of their hard earned money, as it is easy to create a fake identity virtually. Cat-fishing is one of the most common ways NFT fraud and scams can happen. NFTs are often marketed and advertised using celebrities and influencers, and often using hacked or compromised social media accounts, making it hard to know who is real and who isn’t.
One of the most common ways NFT fraud and scams occur is when someone poses as a celebrity and influencer, and messages users on social media. If you ever receive a direct message from someone claiming to be an NFT founder, or other notable person, you must ignore this message, or at very least scrutinize it thoroughly. In the NFT trading world, it is etiquette to not message potential investors unless they initiate contact first. If someone messages you offering you NFTs, ignore them and don’t click on any links. NFT Fraud and scams often depend on you not knowing any better, so make sure that you don’t engage with these hackers.
Another commonly seen form of NFT fraud and scams include ‘pump and dump’ schemes. Pump and dump schemes happen when someone buys a large selection of NFTs and cryptocurrencies, which then artificially drives demand. Once they attract a lot of investment, they then cash out as soon as prices are high. This means that all of those who invested are left with worthless NFTs. Pump and dump schemes are a very common type of NFT fraud and scam, because it is hard to know when this is occurring.
However, by doing your due diligence, you can avoid becoming a victim of a pump and dump scheme. Before you invest in an NFT, check the history and records of the specific NFT project. This is why it is good to have an accessible blockchain, as these records can be easily accessed. Make sure to follow the project on social media – if the project has lasting and legitimate value, it should have a following of interested investors. Carefully assessing an NFT project before you decide to invest is a key part of avoiding NFT fraud and scams.
It can be very easy to create counterfeit NFTs, and is one of the more common types of NFT fraud and scams. It’s worth noting that calling a piece of art an NFT isn’t the same as having IP ownership of the image. With new user-friendly software such as OpenSea, almost anyone can create an NFT of an image, whether they own it or not. This means they are much more likely to fall victim to NFT fraud and scams as it’s easy to make a fake NFT look legitimate. Scammers can very easily steal an artist’s work and open a fake account, listing the artwork for auction. This will make the NFT have no value, and if you’ve invested, there is no way of retrieving your money. Unfortunately, this is a very common way NFT fraud and scams can empty investors pockets, and damage trading confidence.
Before you make an NFT investment, do your research and ensure that the artwork is from a verified source. Always look for credentials and official markings (such as Twitter’s blue check mark) next to the artist’s profile to determine whether it’s from a verifiable source. Do a search for the artist online, and try to find their social media profiles/websites, and try to message them to determine that the work is legitimate. If you can’t find them, or they can’t verify it, steer well clear. NFT fraud and scams depend on you not doing your research, but if you take care to do your research, you can protect your investments online.
By keeping an eye out for these common signs of NFT fraud and scams, you can better protect yourself, your wallet, and your investment portfolio.
If you think you’ve fallen victim to NFT fraud and scams, as wealth recovery solicitors, we will be able to provide expert advice and help you potentially recover your losses. If you need help recovering from NFT fraud and scams, contact us today and we will be in touch as soon as possible to aid you with the NFT recovery process.