As the non-fungible token (NFT) market heats up, so too are scams surrounding the digital asset class. Many are warning that this NFT bubble is not only attracting speculators but also scammers who are committing Ponzi schemes.
Niche crypto assets, NFTs are a blockchain-based record of ownership of digital items such as an image or a video. The NFT market is considered a bubble — an economic cycle marked by a rapid escalation of market value, particularly in the price of assets.
Ponzi schemes were named after Charles Ponzi who swindled Americans out of $15 million in the early 1920s. More recently, Bernie Madoff pulled off the largest Ponzi scheme to date, conning thousands of investors out of $20 billion in principal funds. He was arrested in 2008 and died in prison on April 14 at age 82.
A Ponzi scheme is an investment that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. Instead, they use it to pay those who invested earlier and may keep some for themselves.
There are five areas of scams or frauds that have increased along with the NFT bubble, according to new research from Bolster, a fraud prevention platform. The scams include replica NFT stores, fake NFT stores, counterfeit or fraud NFTs, fake airdrops and NFT giveaways, and social media scams.
“Cryptocurrencies and NFTs have attracted the attention of…