NFTs A Minefield Of Scams Warns Cybersecurity Expert

New Zealanders are being urged to avoid getting sucked into the current mania around non-fungible tokens (NFTs) because scams are as common as promises of profit.

Host of Radio New Zealand's Tech Tuesday and author of the book 'She'll Be Right (Not!) – a cybersecurity guide for Kiwi business owners – Daniel Watson says the completely unregulated NFT market is effectively one giant Ponzi scheme.

"There's massive hype, much of it fuelled by paid advertising and social media campaigns paid for by organised crime. There are stories of millions of dollars to be made where an entirely speculative value is assigned to a digital asset, and then the rug gets pulled with alarming frequency."

A rug pull occurs when so-called developers siphon off investors' money and then abandon the project, taking vast sums of illicitly earned cash with them. Examples include the recent SQUID token scam – where criminals made off with $US3.3m of investors’ money – and Ozzy Osbourne's NFT collection CryptoBatz, after phishing criminals changed the linked shared on the project’s official Twitter account to enable them to syphon money from investor's cryptocurrency wallets.

"Some of the buying is done by the scammers themselves to create fake hype and drive-up demand. They make off with your money, and all you have to show for it is a worthless JPG file."

Watson says an NFT is a so-called artwork – photos, graphics, video and audio – that uses blockchain to assert the right of ownership to the artwork (like a digital ledger).

"While you may have your ownership verified by blockchain, there's nothing to stop somebody clicking on a link and downloading a copy – it's like the tulip mania that seized Europe in the 17th century. It's completely nuts.

"Like every scam before it, NFT scams appeal to people's vulnerabilities and that fear of missing out on the gold rush. Some people are making money, but far more are losing money buying something they can't ultimately sell."

Watson says that anybody running a 'pump and dump' scheme would get arrested in the real world, but not in the relatively lawless blockchain ecosystem.

1. Proceed with caution

"I'm not saying don't invest in NFTs and cryptocurrency, but I am saying proceed with extreme caution because scams are common. Bear in mind that there are more than 10,000 cryptocurrencies, and who knows how many NFTs. People are getting ripped off daily."

2. Do your homework

Watson says if you want to get involved in cryptocurrency and NFTs, research the kind of problem the blockchain solves – if it doesn't solve a problem, it's best to avoid it.

"Find out who the vendor is and what kind of reputation they have. Have they been involved in previous projects? How did those projects end up?"

3. Don't invest more than you can afford

"Only invest what you can afford to say goodbye to forever. If the investment is going to hurt, don't do it."

Watson says that, like everything, if your Uber driver is telling you about crypto, it's probably time to get out.

For more information visit: https://www.linkedin.com/in/daniel-watson-smb-cybersecurity-expert-07424b12/

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