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Scammers Stealing Millions From NFT Investors

Jonathan loves talking politics, economics and philosophy. He carries unique perspectives on everything making him a rather odd mix of liberal-conservative with a streak of independent Austrian thought.
Published: January 11, 2022
NFT owners are being targeted with scams.
NFT owners are being targeted with scams. (Image: TheDigitalArtist via Pixabay)

Non-Fungible Tokens (NFT) are the latest items to become a sought-after asset class. An NFT is a non-interchangeable unit of data stored on a blockchain in the form of a digital ledger. It can be anything digital, such as videos, audio, or photos. Just like any other valuable assets, NFTs are also attracting scammers.

A recent case of NFT theft involved Todd Kramer, the owner of Chelsea art gallery. On Jan. 1, roughly $2.3 million worth of his NFTs were stolen by scammers. Most of the NFTs stolen from Kramer belonged to “Mutant Apes” and “Bored Apes” NFT image collections. 

Kramer discovered that the NFTs were listed by the scammers on OpenSea, an online NFT marketplace. He immediately contacted OpenSea and reported the crime. OpenSea froze the trading of the stolen NFTs on their platform.

Kramer had also appealed to the NFT community to help him take back his assets. However, many members of the community scolded him for not protecting his NFT assets better by storing them in an offline wallet. They also criticized OpenSea for blocking the trade of stolen NFTs as it goes against the core idea that “code is law.” It means that once an NFT is in someone’s wallet, it belongs to them. OpenSea replied, saying that they have “policies in place” to deter theft on their platform. 

“We do not have the power to freeze or delist NFTs that exist on these blockchains, however we do disable the ability to use OpenSea to buy or sell stolen items. We’ve prioritized building security tools and processes to combat theft on OpenSea, and we are actively expanding our efforts across customer support, trust and safety, and site integrity so we can move faster to protect and empower our users,” OpenSea said in a statement.

While OpenSea’s intervention in Kramer’s case may have blocked a scammer from profiting from theft, such actions have also caused problems for innocent investors. In a series of tweets on Jan. 6, Marco Grassi recounted his “horror story” while buying an NFT through the platform. He bought the NFT for 1.5 ETH (Ethereum, a digital cryptocurrency). A few hours later, he listed the NFT for sale at 2.9 ETH.

“Out of the blue I get this warning on the NFT saying ‘Reported for suspicious activity’. Suddenly, I can’t sell or transfer the NFT on OpenSea anymore,” Grassi tweeted. He had unknowingly purchased a stolen NFT that OpenSea froze. 

The price of the NFT had spiked to 2.5 ETH by this time. He sought help from OpenSea but the platform couldn’t aid him in any way. The creator of the NFT project then reimbursed Grassi with 1 ETH.

Kramer’s loss of NFTs shows how easy it is for scammers to shift digital assets from your wallet to theirs. A popular way scammers target NFT collectors is through fake offers. The scammers send the collectors emails claiming that someone has made an offer for the NFTs they had put up for sale. 

When the individuals click the button on the email, they go to a webpage that asks for a link to their wallets as well as the seed phrase or recovery phrase. Once these credentials are secured, the scammers can then break into the target’s wallet and steal all the assets. 

Fake support agents also contact NFT owners, enticing them to reveal more details of their wallet credentials by promising to help them solve some technical issues. Similar to the fake offer tactic, the scammers will gain access to a wallet’s credentials and try to get their hands on everything inside.