Markets News Report
August 17, 2023

Navigating NFT Scams: Exploiting Pending Transactions and Impersonating Developers

In Brief

Despite a general decrease in NFT crimes, the FBI has issued a warning about scammers impersonating NFT developers to execute fraudulent schemes.

The Pudgy Penguins Discord incident exposes scammers exploiting pending transaction vulnerabilities to target NFT sellers.

Navigating NFT Scams: Exploiting Pending Transactions and Impersonating Developers

Despite the less-than-ideal state of the NFT market, scammers continue to operate within the industry.

The US Federal Bureau of Investigation (FBI) recently warned about a new fraudulent trend: criminals impersonating NFT developers to execute financial scams. Scammers employ a dual approach, infiltrating legitimate developers’ social media profiles or creating nearly identical accounts.

These perpetrators then promote fake NFT releases with aggressive media campaigns using urgency-inducing phrases to garner intrigue — like “limited supply” and “exclusive mints.”

After a victim invests, scammers lead them to counterfeit websites through phishing links. The websites also prompt victims to connect their crypto wallets to make asset purchases. The FBI explained that this process typically results in transferring cryptocurrency and NFTs to the scammers’ wallets.

Discord channels dedicated to NFT collections remain among the most prevalent platforms for scams.

A Pudgy Penguins Discord incident revealed scammers using a new tactic to deceive NFT sellers in over-the-counter (OTC) deals. The scam entails a fake buyer sending a pending cryptocurrency transaction to pressure sellers into releasing their NFT prematurely. Despite the buyer’s convincing approach, the transaction eventually fails, exposing a vulnerability that scammers manipulate.

Pudgy Penguins’ Community Safety Lead, known on Twitter as TheChild, shared on X (formerly known as Twitter) that scammers initiate a cryptocurrency transaction, specifically in USDT, to the seller’s wallet. They then share transaction details to create a false impression of payment.

Afterward, the scammer employs psychological tactics, posing urgent queries such as “Did you get the money?”  — insinuating doubts about the seller’s intentions to coerce them into releasing their NFT before the transaction’s finalization.

These scammers often suggest the Exodus wallet, falsely boosting portfolio value with pending transactions – a loophole needing Exodus’ attention. Trust manipulation underscores how scammers exploit emotions, driving costly errors.

“Also worth noting this scammer was operating in our token-gated discord channels. Just because someone owns an NFT from your favorite collection doesn’t mean they are a good actor!,” TheChild wrote on Twitter.

Security experts emphasize conducting OTC deals based on the seller’s terms and exercising caution if a counterparty demands specific tools. Sellers must retain NFTs until they securely receive payment. Although the allure of quick deals exists, established platforms offer greater safety.

The Pudgy Penguin incident underscores the necessity for caution and due diligence to avoid scams.

Millions Worth of NFTs Stolen Monthly in 2023

NFT thefts in July 2023 amounted to $1.73 million, marking a 31% decrease from June’s $2.27 million theft. The year’s highest NFT theft occurred in February at $16.2 million, followed by March with $10.9 million stolen. January and February saw 50% of stolen NFTs sold on OpenSea. In June, over 80% of stolen NFTs were sold on Blur.

July witnessed 19.63% of NFT thefts from OpenSea, 20% from X2Y2, and a majority, 67.3%, from Blur—the current leader in monthly NFT trading volume.

Stolen NFTs were rapidly sold across various platforms within 165 minutes post-theft, as reported by blockchain security firm PeckShield.

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In line with the Trust Project guidelines, please note that the information provided on this page is not intended to be and should not be interpreted as legal, tax, investment, financial, or any other form of advice. It is important to only invest what you can afford to lose and to seek independent financial advice if you have any doubts. For further information, we suggest referring to the terms and conditions as well as the help and support pages provided by the issuer or advertiser. MetaversePost is committed to accurate, unbiased reporting, but market conditions are subject to change without notice.

About The Author

Agne is a journalist who covers the latest trends and developments in the metaverse, AI, and Web3 industries for the Metaverse Post. Her passion for storytelling has led her to conduct numerous interviews with experts in these fields, always seeking to uncover exciting and engaging stories. Agne holds a Bachelor’s degree in literature and has an extensive background in writing about a wide range of topics including travel, art, and culture. She has also volunteered as an editor for the animal rights organization, where she helped raise awareness about animal welfare issues. Contact her on [email protected].

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Agne Cimerman
Agne Cimerman

Agne is a journalist who covers the latest trends and developments in the metaverse, AI, and Web3 industries for the Metaverse Post. Her passion for storytelling has led her to conduct numerous interviews with experts in these fields, always seeking to uncover exciting and engaging stories. Agne holds a Bachelor’s degree in literature and has an extensive background in writing about a wide range of topics including travel, art, and culture. She has also volunteered as an editor for the animal rights organization, where she helped raise awareness about animal welfare issues. Contact her on [email protected].

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