Spotting a Fake — NFTs and the underworld of scams and forgery
So, you’ve decided to start looking into the NFT or Crypto world? Or you just want to know a bit more about the industry? Unfortunately, as you are probably aware, the industry is rife with scams and malicious actors. As a team, we have been involved with the NFT space for over a year now and we’ve seen a lot of crypto token scams, influencer scams and NFT scams in our time. Many of them are100% well-meaning and things turn out poorly due to oversight, others are well-meaning at first and start to see the pay off and then run away with the money after the project becomes too hard, while others start with malicious intent from the get-go. So why would we as a team bring this topic up? Shouldn’t we be hiding, shying away from or down playing these topics? Well, as a fledgling project in the industry, we want to inspire confidence not only in those that invest in our project and roadmap through transparency and clear communication, but also help repair some of the industry’s poor reputation. We know as a fact bringing more light on the topic as new people enter the area that we can help reduce the effectiveness of scams.
There is a reason NFT’s have become so popular; due to their versatility and utility (their ability to provide function outside of just being the thing they represent, like real world or virtual access to events or services), but there is also a reason that they have become the butt of many jokes and a reason for uncertainty; it’s easy to make scams and scammers are cashing in.
Where we get our information from
There are a number of resources, but by far the stand out is “Coffeezilla” on YouTube. If you haven’t already seen or heard of him he is a self proclaimed “internet sleuth” and is entertaining while explaining the scam. He digs out these crypto/NFT based scams with the intent of bringing some justice or clarity to the people who were affected. A notable example is one of “Save the Kids coin” which was “shilled” (publicly promoted, sometimes in a misleading way), under the guise of being a charity to help “Save the Kids”, by popular YouTubers in an attempt to extract money from their followers.
Other sources of information has just been the news, speaking with others in the NFT space who have been affected, and our own personal experience.
First of all some terminology
Welcome class, to the the extraordinary terminology of crypto. Today we will be learning about the term “Rug Pull”, “Rugged” or simply “Rug”. Does anyone know what this means? No? It is when a project, usually Crypto-based in our instance, such as an NFT collection or Coin, sells all of or part of the collection / coin pool to the community then withdraws all the support for it immediately and drains the project of all the money for themselves. Often times people will use this terminology in an actual rug pull situation. Other times it will be used when the creator or developer of the project promises massive gains (10x, 100x, 1000x your money!), and none of which are realised whether in a loss or a reduced gain.
What type of scams are there?
There are a few main scam types, or methods to extract money or crypto from you or your loved ones. We will go through each one, how the scam works, how you might be targeted and what you can do when you see them.
- Coin Scams
- NFT Scams
- AirDrop and Malicious Smart Contracts
- Bundle Scams
- Forged/Hacked Minting websites
Coin scams are sometimes also known as “sh*t coins” or “meme coins” (although these aren’t interchangeable, as some meme coins go onto to be highly successful eg DOGE and SHIBA). These are often coins that are peddled by your favourite YouTuber or Instagramer, although again just because they are pushing a coin doesn’t mean that this should be avoided. There are plenty of successful influencer backed projects. Some questions to ask yourself are:
- Are the influencers promising massive gains? (Newsflash, people can only speculate stock or crypto prices, promising gains can be a red flag)
- Is the mint date or coin offering date really soon? (Creates urgency and clouds peoples judgement)
- Are there other known scammers on the project team?
- Does the project have a professional website?
- Are they placing a lot of importance explaining how the project “wont or can’t be rugged” as opposed to leaning into the value proposition or real world utility of the coin?
There are an additional set of coin scams where the coin looks very similar to another, for example $SH1BA contains a 1 instead of the letter I. These will often come from the comment section of a video, a DM or a tweet. Ensure the website is valid and what you expect and the content that is shown is correct. Before acting on any coin, stop for a moment and ask yourself these questions.
Very similar in concept to the Coin scams where they are pushed by hype by your favourite influencers and then dumped at varying stages of the NFT lifecycle (Gift Mint -> Mint Presale -> Mint Public Sale -> Reveal Metadata and Artwork). The same set of questions apply, do your due diligence and don’t purchase based on hype.
AirDrop and Malicious Smart Contracts
AirDropping is when you log into your wallet one day and find coins or NFT’s that you haven’t purchased in your wallet. Usually these are crafted using malicious code and sent to people who have something in their wallet that the scammers want. It has cost the scammer money to send this to you, but they hope that you will interact with it in some way (Sell, Transfer, burn etc) so the malicious code will be activated and will perform some action on your wallet; such as draining it of all your coins or NFTs. They do this in the hope that it’ll pay off more than what they spent on them. If you know how to look up the contract for this NFT or Coin on etherscan.com you can check to see if the contract is verified, if not this could be a sign (but again not always the case) that it may be a scam. Most people don’t know how to do this, but in most cases as a general rule, if you haven’t bought it; don’t try to sell it or transfer it. If you are truly paranoid, start up a new wallet, transfer your valuable coins and NFT’s to it then forget about the old wallet. Although if you have some truly valuable assets in your wallet; expect it to happen again as there is no way to stop this.
Bundle scams are when you purchase an NFT bundle (more than one NFT) and they look like they are multiple NFTs of the same collection however one or more are fake. The fake NFT bundled may either be a ‘dumb fake’ in that the only purpose is to look like the real one or it could contain malicious smart contract code (as explained above). There are now tools that help you discern if all NFT’s are of the same collection in a bundle, but the easiest way is just to double check yourself and check what you are buying before you buy it.
Forged/Hacked Minting websites
Being in the NFT community a while now I have seen my fair share of this. Often times it will be in the form of a discord DM from a user in a NFT discord server that I’m connected to. They will often have a lot of urgency attached such as “MINTING NOW”, “QUICK, SELL OUT IMMINENT” etc. then a legitimate looking link to a minting website. Always cross check the projects official links with those of the website you are on. Stop and ask yourself “is this domain name legitimate”, “Is this site legitimate”.
In conclusion, there are a number of common crypto scams but simply asking yourself a few basic questions and not purchasing based on hype can go a long way to not falling for one of these scams. We hope to help by providing some transparency to the community.
- If it’s too good to be true it probably is.
- Due diligence, make sure you cross-check the facts.
- Take a moment to ask yourself if you are acting on hype or good investing principals.
- Careful to double check what influencers are pushing, there is little to no regulation or consequences for people even if they get caught.
- Go check out https://cryptowilddruids.com/ to see our NFT project.