NFT Hacks and Scams
Part of our special research report
State of the NFT Market | Q1 2022
In partnership with CryptoSlam
As NFTs continue to draw new users, hacks and scams have begun to surface in the nascent industry.
According to blockchain analytics company Chainalysis, the two most popular NFT-related crimes are money laundering and wash trading. The amounts involved are, however, relatively small with Chainalysis estimating that such criminal activities generated illicit profits of US$10 million in 2021.
Nonetheless, investors and collectors of NFTs need to be on their guard.
In January 2022, hackers exploited a bug vulnerability in the OpenSea NFT marketplace to purchase high-value NFTs from users at well below market prices. Elliptic, a blockchain AML analytics company, found that no fewer than five attackers exploited the bug loophole to buy at least 12 NFTs: including Bored Ape Yacht Club, Mutant Ape Yacht Club and Cool Cats NFTs.
Illicit actors have also taken advantage of Discord, a popular chat platform used by NFT communities to communicate, to take over or impersonate the official servers of NFT projects including Larva Labs. In December, a hacker infiltrated the Discord server of Monkey Kingdom, an NFT collection founded by entrepreneurs in Hong Kong, to steal 7,000 Solana, or approximately US$1.3 million, from would-be buyers through a phishing scam.
The NFT industry is no stranger to copyright infringement issues. OpenSea said in a recent tweet that over 80% of the items created with its free minting tool were plagiarized works, fake collections and spam.
CryptoSlam’s Calpu told Forkast: “Plagiarized works have always been an issue and will continue to be an issue within the NFT industry. For that reason, it’s important for buyers to check multiple sources of verification that they are in fact buying an NFT with a verified and known author, whether that verification is by the marketplace or by confirmation on social media.”
“Just like in the traditional art world, counterfeits and forgeries also run rampant. The silver lining is that with NFT technology it’s fairly easy to determine fakes, and plagiarized works,” he added.
NFT sellers by numbers of sales to self-financed addresses, 2021
special research report: State of the NFT Market
table of contents
The NFT Market By the Numbers
Blockchains and NFTs
The Rise and Rise of NFTs | Interview: Charles d’Haussy
NFT Avatars — A New Identity
Trends Driving NFTs Growth
Trends Within the Trend | Interview: Helen Hai
Asia Primed for NFT Growth
Getting Creative | Interview with Audrey Ou
Metaverse Set to Boost NFTs
The Metaverse Conquest | Interview: Sébastien Borget
NFTs Behind the Pictures | Interview: Reeve Collins
The Boost From Blockchain Gaming
NFT Marketplace Competition Heats Up
NFT Marketplace Rivals’ Arrival | Interview: Zach Burks
New Investors and Investments
NFT Hacks and Scams
Regulations on the Radar
Decoupling of NFTs from Cryptocurrencies
Challenges to Address