I almost lost $500 over last weekend - A sneak peak into NFT Scams
Date: 22 July 2023
Author: Gaya Chandrasekaran
Over the past few weeks, I had noticed a few artists on Instagram with clear messaging around NFTs – they wanted to have nothing to do with them whatsoever. I was wondering what this was all about. And then over last weekend something happened.
I had just made an insta post on one of my artworks on Saturday morning (1st July) after having finalised the piece during the week. It was the first one of a series that contained an inscription in Tamil (my native and one of the oldest surviving languages in the world) of a classic called Tirukkural.
Tirukkural is a collection of 1330 couplets or kurals dealing with everyday virtues of an individual; considered one of the greatest works ever written on ethics and morality, it’s known for its universality and non-denominational nature. Authored by Valluvar and dated variously from 300 BCE to 7th century CE! The inscription in this painting is the first of the 1330 couplets and is an obeisance to the ultimate cause of all beginnings.
As you can imagine I was really satisfied with the way this piece turned out and was super thrilled to receive a flattering comment on my ‘incredible creativity’, for which I got scored 10/10 by this specific profile (@cedricwim12). I was asked to DM him if I’m interested in selling my art, which I obviously did. I even pointed him to my listings on Plogix Gallery for direct purchase, but he was keen on NFTs.
I had created NFTs whilst listing my physical artworks for sale on Plogix Gallery but the NFT marketplace is being revamped so I spent most of my Saturday digitising a handful of physical artworks into NFTs on Opensea and shared the link with the buyer.
I did have a minor suspicion as I felt his offer was ‘too good to be true’ – he offered 5 ETH (roughly £7500) for each of my NFTs and said he’d buy about 5 of them (vs. their pricing of 1-2 ETH each). I had hence emptied the metamask wallet linked to my Opensea profile. With the links I shared, he should have been able to buy them on Opensea directly, however, he mentioned he was funding his wallet and sent me a snapshot of 41 ETH in his account – frankly, this piece of information was quite unnecessary.
Soon after his alleged attempt to purchase my NFTs I received a snapshot of ‘Transaction Declined’, indicating the buyer had to pay validated gas fees to a wallet address belonging to Opensea for the transaction to go through.
Not reading too much into this and giving the buyer the benefit of doubt, I acknowledged that my wallet was not funded to pay gas fees (remember, I had moved my funds to a different wallet ahead of this transaction) and that I would let him know once done.
After I sorted this out at my end, he kept chasing me to make the gas fee payment to a wallet address (supposedly opensea’s) mentioned in the snapshot he shared. My suspicions turned out to be true!
Gas fees are transaction fees paid to validators on Ethereum. OpenSea does not receive these fees and is not able to refund them. OpenSea also doesn’t control gas prices nor does it profit from them.
Also, gas fees happen on autopilot in a purchase transaction (no separate steps involved!) – the seller’s wallet gets debited for price and transaction fee with an NFT credit whilst the buyer’s wallet gets credited for the price and debited for the transaction fees as well as the NFT.
Obviously I refused and asked him to complete the transaction through opensea if he wants to purchase my NFTs. He sent several messages on how he can only purchase validated NFTs (not rough art) and that unless I transfer the money, my NFTs are not validated. He sounded quite desperate to get me to make the payment.
Of course, from this point on I blocked him on Instagram! On the one hand I felt quite relieved that I did lose money by overriding my suspicions and intuition. On the other hand though, I felt super drained and exhausted, so much so that the rest of my Sunday was pretty much a washout!
Meanwhile there was another profile on Instagram expressing interest in my NFTs and wanted me to scan a QR code to receive funds. Again, this did not make sense. Its well known that scanning QR codes is to make payments and not the other way around. Finally, I figured why some artists have blocked all content on NFTs from their Instagram profiles.
Here are the Red Flags from my experience:
- Offering to buy NFTs which are not pure digital or phigital art at inflated prices which feel ‘too good to be true’. I digited my physical artworks as early as Oct-21 but was lucky enough to meet a genuine NFT Collector via Instagram who advised me that NFT Collectors are into pure digital or phgital art vs. digitised versions of physical art. Since then I have resorted to offering NFTs in lieu of Certificate of Authenticity for my Physical or Traditional artworks whilst trying my hand at learning digital tools (Such as Procreate)
- Sharing snapshots of balance in wallets, failed transactions which seem genuine at first glance.
- Trying to sound too technical so it intimidates you into believing they know better.
- Incorrect grammar, poor sentence construction in English if you read closely.
- Building up a story to get you to click links or scan QR codes
Refer to a recording of my NFT Masterclass – Part II with Fintech Circle where I go through the steps involved in creating and purchasing NFTs here:
- NFT Masterclass Part I https://www.bigmarker.com/fintech-circle/Non-Fungible-Tokens-NFTs-in-Practice?utm_bmcr_source=FTC%20Website
- NFT Masterclass Part II https://www.bigmarker.com/fintech-circle/NFT-Master-Class-Part-2
Did you know the 5 most common NFT scams in 2023?
- Rug-Pull Scams: NFT creators or developers hype an NFT but pull out after receiving substantial funds from investors (Frosties NFT rug-pull)
- Phishing Scams: Hackers send out fake links often through email or popular social media channels and forums like Twitter and Discord, once you click the link and enter your details they use spyware to access your account and compromise it)
- Bidding Scams: When you put your NFT up for sale, scammers place the highest bid but they can change the cryptocurrency used for the bidding without your knowledge. Imagine a bid for 20 ETH which could get switched by the scamming bidder to 50 Dogecoin which is worth <$5.
- Pump-and-Dump Scams: Fraudsters artificially inflate the price of an NFT by misrepresentation and spreading misleading information. Once the price goes up, they ‘dump’ the NFT and disappear without a trace, leaving investors with worthless assets.
- Counterfeit or Plagiarized NFTs: NFTs are all about creating unique tokens. Unfortunately its quite profilic on many platforms. Opensea recently reported that >80% of NFTs minted using its tool were fake. The value of an NFT purchased will obviously drop as soon as it becomes clear that its fake.
Some less common NFT scams are listed below:
- NFT Giveaways (Airdrop Scams): Fraudsters ask you to promote an NFT and sign up on their website in exchange for a free NFT – once done, they’ll send you a link to receive the NFT but in essence they steal your account details to steal any valuable NFTs and/or funds in your account.
- Investor Scams: Fraudsters create legitimate NFT projects and tout them as worthwhile investments however in reality the projects are worthless. After stockpiling enough investor funds, they disappear without a trace.
- Customer Support Impersonation: A type of phishing scam where fraudsters pose as customer support agents of an NFT marketplace – typically contact you via Discord, Telegram or Twitter with an issue regarding your account and send through a link requiring you to enter private wallet keys.
Read about NFT Scams in details here https://www.cloudwards.net/nft-scams/
Some safety tips as a rule of thumb are highlighted as below.
- Research adequately before purchasing NFTs
- Store all NFTs (and digital assets) in cold storage – the wallets connected to NFT marketplaces or the internet in general are considered hot storage and are vulnerable to theft
- Don’t click on any random links
- Don’t scan any QR codes whilst receiving money
- Don’t share your password or wallet secret recovery phrase. Enabling two-factor authentication on your account helps add an additional layer of protection.
Use a virtual private network (VPN) to encrypt and anonymise your NFT traffic. I personally haven’t used this but have heard from my network that this is quite effective.
About the Author
Gaya works in the Global Digital Solutions Group (DSG) within Santander Corporate & Investment Banking (SCIB), which focusses on developing innovative, sustainable and profitable digital capabilities and providing state of the art advisory services to clients.
She joined Santander in 2014 gaining broad experience across Corporates & FIG in SCIB and has also worked on several strategic initiatives including regulatory deliverables. Her work involved deal structuring, due diligence and portfolio management. During this period, she has won awards and nominations to Accelerating You Programme for Future Leaders and Global Risk Leadership Programme.
Gaya recently completed the Fintech Programme from Oxford University. She holds a Masters in Finance from London Business School (Recipient of Graduating Student Award) and an MBA (Gold Medallist) from India.
She has contributed actively to alumni engagement at LBS since graduation through several leadership positions, most recently as an ExCo Member of London Alumni Club where she led events on identifying fintech winners, cyber risk, sustainability & factor investing involving C-suite speakers, industry experts and faculty.
Gaya is a Mentor and the Head of Personal Excellence Programme (PEP) for London with Women in Banking & Finance (WIBF). She is passionate about supporting women in their ambitions and enjoys organizing knowledge-sharing networking events.
Outside her day job, Gaya is a self-taught artist and has been influenced by art right from her early childhood. She loves learning new techniques and underwent training in India as well as in the UK (Slade School of Art). Her choice of themes are inspired by key life moments. An expression of her thoughts and emotions, her artworks invite the audience to go deep within, explore and connect with their own experiences.
Gaya offers NFTs in lieu of a Certificate of Authenticity to all her collectors – its her mission to facilitate digitisation to her audience. Based on feedback from a renowned NFT Collector she is now exploring software tools to mint NFTs of pure digital artworks.
Gaya’s first solo exhibition was in 2018 at Santander’s London office, a fundraiser where she sold >70% of artworks donating 50% of proceeds to charity. Her painting, ‘The Golden Lion’ won a special commendation in the David Shepherd Wildlife Foundation’s #sketchforsimba competition in 2019.
She conceptualised the first ever Art Exhibition within the LBS community, which led to LBS Art Week in 2021 where her paintings were selected for the online exhibition and she was a chosen speaker of the Artists Panel. She exhibited her artworks with The Holy Art Gallery and The Boomer Gallery in London during 2022. Her artworks are published in the Artist Talk Magazine Issue 22 & 23.
“Please note the opinions expressed within the content above are solely the author’s and do not reflect the opinions and beliefs of people, institutions, or organisations that the owner may or may not be associated with in a professional or personal capacity.”