NFTs (Non-Fungible Tokens) are digital resources representing objects like art and music. People purchase them online, usually with cryptocurrency, but they are involved in many scams.
Although you might think NFT scams can’t affect you, scammers are becoming smarter about how they approach and target you.
If you’re the victim of an NFT scam, you’ll want to know how to recover your losses. Read the rest of this article to learn about the common NFT scams, how to avoid them, and what steps to take if you’re the victim of a scammer. We’ll also look at why you should contact a lawyer for guidance.
What are Common NFT Scams?
There are always new NFT scams that arise, but some of the most common include the following:
- Phishing attacks. NFT scammers attempt to get your login details, such as by sending you malicious links on social media.
- NFT Ponzi scheme. Scammers promise high returns for new participants. Early investors get paid due to new investors joining. When the money stops, the system will collapse.
- Fake marketplaces. These are designed to resemble legitimate marketplaces so that the scammer can try to get you to make purchases and steal your funds.
- Fake NFTs. When you purchase these, you’ll risk financial losses.
- Pump and dump schemes. You might have heard about these schemes in cryptocurrency. To increase their profits, criminals will increase the NFT price and build hype around it, then sell it quickly and cash out.
- Airdrop scams. Scammers use social media platforms to give NFT freebies. They will airdrop fake free NFTs into your wallet. By getting your wallet details, they can clear out your funds.
How Can You Avoid NFT Scams?
To prevent NFT scams from affecting you, there are important things you should do to protect yourself.
Verify Sellers
Check their transaction history, as a long list of transactions in one day could point to an NFT scheme, such as a pump and dump. If you can’t get much information about the sale or artist, proceed with caution. The creator should have a valid website and social media profile.
Although some NFT sellers do remain anonymous, you should still be able to find information about the team who established the project. They’ll usually have a following on platforms such as social media.
Avoid New or Unknown Marketplaces
To avoid being scammed by a fraudster who’s set up a new marketplace, stick to transacting on verified marketplaces. They should have security measures in place to protect both sellers and buyers.
Protect Your Digital Assets
Use measures such as two-factor authentication so that your NFT accounts are protected against fraudsters trying to gain access to your information and money. Only using secure wallets, with the best being a hardware wallet, is essential to avoid theft.
Don’t Accept Airdrops
Avoid accepting unsolicited airdrops. If you want to accept an airdrop from someone, you should first verify them, such as on social media platforms.
Never Share Details
Avoid sharing your seed or recovery phrase that grants you access to your crypto wallet as it could put your NFTs at risk. It’s a red flag if someone asks you for this information, as that’s usually a sign that they’re trying to steal your assets.
What Should You Do if You’re the Victim of an NFT Scam?
If you’ve been targeted by scammers, it’s crucial to take action quickly. Here’s what you should do.
Report the NFT Scam Immediately
You should report the scam to the marketplace where you dealt with the scammer. Their support team will be able to block the fraudster.
Provide as much information about the scam and scammer as you can. You should also report it to the authorities.
Record Information About the Scam
Document all the communication with the scammer, such as texts or emails. Try to get information about the transaction, as well as any identifying details of the scammer.
Contact a Lawyer
It’s crucial to contact a lawyer so that you can try to recover your assets. Although it can be challenging to find a reputable, professional lawyer, you can find a lawyer who is interested in your case and has experience on ContractsCounsel, an online legal network connecting vetted lawyers with clients.
Here is how a lawyer can help you deal with the NFT scam.
- They’ll work with blockchain forensics to trace your funds.
- They’ll investigate your claim to see the scope of the fraud and how they can recover your losses.
- They’ll help you gather appropriate evidence to support your claim.
- They’ll guide you on how to report the scam and stop hackers.
- They’ll send a legally-enforceable notice so platforms don’t hold the stolen assets.
Although in some cases NFTs aren’t recovered, your lawyer can help you to report and stop the fraudster. This can be achieved by informing the appropriate marketplace where the scam occurred, which will blacklist the stolen NFTs.
Investigations into the scam can hopefully identify the scammers so that law enforcement can track and stop them.
What Legal Remedies are There for NFT Scams?
Your lawyer can initiate legal proceedings to stop the fraudster and seek damages. In some cases, alternative dispute resolution methods can be effective. This includes negotiating with the fraudster on your behalf or engaging in mediation.
Mediation is when you hire a neutral, third-party mediator (who can be your lawyer) to facilitate conversations and negotiations between you and the perpetrator. In some cases, this can help you to get your NFTs returned.
Are you dealing with an NFT scam?
Although NFT scams can feel overwhelming, you don’t have to feel isolated. Contact a lawyer from ContractsCounsel. All lawyers are vetted on the platform and have experience in assisting clients with their NFT scams. When hiring a lawyer, they will help you track and trace your funds, stop the scammers, and make you feel empowered to take action.
