An extensive report recently published by crypto auditing firm Elliptic shows the various methods used by cybercriminals to launder and benefit from the immense hype generated by NFTs, at the expense of unsuspecting users.
Between, scam projects, phishing, plagiarized and stolen NFTs, rug pulls and market manipulation the total value of financial crime connected to trading NFT adds up to over $100 million, averaging $300k for every instance of monkey business. So far, over 4600 NFTs were stolen in July 2022, making it the most profitable month for these cyber criminals.
$69.5 million which is over half of the aforementioned figure, to be exact – represents the value of stolen NFTs by various methods. The majority of these thefts were carried out through phishing attacks.
80.1% of the stolen digital artworks were acquired via social media-based phishing and e-mail. The remaining were carried out via impersonation scams, swap scams, and other methods.
Curiously, phishing attacks were not only used to relieve unsuspecting collectors of their holdings, some phishing scams either sold inexpensive NFTs or airdropped free NFTs – often in a .svg format – which functioned as a Trojan horse, granting the scammers access to the user’s wallet once the NFT was received or, in some cases, revealing the collector’s IP address, and other information.
Although there are criminals in the NFT space, the document indicates that many of the rug-pulls that happened within the past year were projects which were started by initially honest developers but they overpromised and, when faced with the reality of their futile attempts at delivering, they decided to exit scam and go into hiding.
Rug pulls within the past year have been quite efficient, with the scammers only gaining several thousand dollars before moving on to the next set of unlucky victims. However, there are some exceptions– such as the Evolved Apes debacle, where the scammers gained nearly $2.5 million off hopeful BAYC latecomers.
The report ends with several recommendations to aid users who wish to protect themselves from becoming victims of such scams and warns readers that in the future, scams may take forms not yet seen anywhere else, and so everyone to keep their guard up.
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