NFT scams continue

Gizem Yaralı-12punto

Unique digital assets, or non-fungible tokens as they are known in English; in other words, NFTs... Although they are very new in our lives, scammers have already emerged.

WHAT IS BEING DISCUSSED?

NFT fraud has started to be reflected in headlines frequently.

Some of the topics being discussed recently include the statement made by OpenSea CEO Devin Finzer regarding an NFT scam worth 1.7 million dollars, and a Chinese student losing NFTs worth 548 thousand dollars after clicking on a scam link.

WARNING FROM BLOCKCHAIN DETECTIVE REGARDING NFT PROJECT SHARED BY OPENSEA

It drew attention that the NFT marketplace OpenSea shared a post about an NFT project that had not shared anything for a long time.

The official Twitter account of OpenSea shared the NFT project named "FATZUKI" on November 26. Blockchain detective ZachXBT noted that this project had not made any posts on Twitter for 4 months.

The detective suspected that someone might have made such a move to create exit liquidity, known as an "exit pump." Following ZachXBT's response and the reactions that followed, OpenSea deleted the post.

The floor price of the NFT project in question had risen to 0.019 ETH after its release, but then it almost hit zero. Fatzuki's total trading volume has been recorded as 393 Ethereum (ETH) so far. In the current situation, the floor price was observed to be 0.0058 ETH.

The post made by OpenSea reminded some users of the insider trading penalty received by former OpenSea Product Manager Nathaniel Chastain. Following the accusation and the penalty received, Chastain was sentenced to 3 months of house arrest and a 50 thousand dollar fine.

NFT marketplace OpenSea announced on November 3 that it would lay off some of its employees. CEO Devin Finzer, who made the announcement on X, stated that the company would launch version 2.0 with a smaller team.

Launched in 2017, OpenSea experienced a major rise during the NFT boom period. After the crypto winter, the organization, which laid off 20 percent of its employees in July 2022, decided to downsize its team again.

An OpenSea spokesperson stated the following in an email sent to Cointelegraph:

"As we focus on building a better version of OpenSea, we are making significant operational changes. We are extremely grateful to those leaving OpenSea for their contributions and are supporting them with a strong package consisting of financial and other support."

The spokesperson stated that approximately 50 percent of employees across all departments of the company would be affected and that the number of middle-level managers would also be reduced. Employees will be given a four-month severance package, accelerated equity allocation, and a six-month health and psychological support package.

The NFT marketplace reached its peak in 2021. Since then, the value of many collection pieces has fallen.

OpenSea received a major backlash from the community in August when it announced that it would remove the filter that allowed creators to blacklist marketplaces that do not require royalty fees. Bored Ape and CryptoPunks creator Yuga Labs began to reduce its use of OpenSea's Seaport marketplace and smart contract in response to this move.

Finzer said in his X post, "As we rebuild, we will continue to support our existing products and will test OpenSea 2.0 in a public format again."

FBI ALSO WARNED INVESTORS ABOUT NFT SCAMS

The American Federal Bureau of Investigation (FBI) warned cryptocurrency investors in a recently shared article. The FBI addressed the operation of fake platforms and accounts encountered by users who purchase digital artwork (NFTs).

Security forces stated that NFT investors have lost large amounts of cryptocurrency in recent days through stolen or fake accounts and explained how malicious individuals lure people into their trap.

HOW DO SCAMMERS SET TRAPS?

Scammers reach out to crypto enthusiasts by stealing or imitating the social media accounts of real NFT projects. Malicious individuals who use "limited or timed sale" arguments to create a fake sense of missed opportunity in such accounts exploit the emotions of the investor.

Posts shared from stolen accounts direct cryptocurrency users to fake sites. If investors connect their wallets through fake websites, they face the risk of losing all their altcoin assets. Scammers move the stolen cryptocurrencies to exchanges after using tools like Tornado Cash.

WHERE DO STOLEN NFTS GO?

Following the FBI report, blockchain security company PeckShield shared research data on social media. According to the data, thieves who steal NFTs from users dispose of the tokens in their hands within approximately 3 hours. Scammers generally use Blur and OpenSea marketplaces for sales.

FAMOUS YOUTUBER LOGAN PAUL'S CRYPTO VENTURES ALSO COLLAPSED

Logan Paul, who entered the list of the 10 highest-earning YouTubers in 2018 and earned the title of the world's most famous influencer in 2021, has recently been on the agenda with his crypto projects Liquid Marketplace, CryptoZoo, and Dink Doink. Known in the past for violating YouTube community guidelines, the famous YouTuber is now facing legal processes because his projects did not fulfill what they promised to investors, according to TIME news. Let's take a look at the projects in the crypto kingdom of famous YouTuber Logan Paul and how each of them was driven to collapse.

CURRENT STATUS OF LEGAL PROCESSES

Although the NFT collection of CryptoZoo, which was introduced as a Pokemon Go-like game based on NFT animal breeding, sold out in a short time, the game could never meet with users. Moreover, the value of the tokens fell to even less than one percent of its peak in August 2021. Recently, the first steps have been taken for a class arbitration lawsuit by CryptoZoo buyers who lost thousands of dollars.

The victims' lawyer, Tom Kherkher, alleges, among other claims, that Paul committed fraud, breach of contract, and negligence. Kherkher is seeking compensation for some of the investors who lost thousands of dollars in CryptoZoo.

Tom Kherkher initiated legal processes that will last for months against Logan Paul and the founders of CryptoZoo last month. The reason it will take months is the terms of service of the CryptoZoo NFT project.

Since the terms of service in question prevent users from filing a class-action lawsuit and applying to a public court, lawyer Tom Kherkher has to file individual arbitration requests on behalf of the victims. Kherkher states that they are determined in this regard and will file 500 lawsuits in a row if necessary.

LOGAN PAUL'S STATEMENTS

According to the shared information, Logan Paul announced on January 13 that he would give up his shares in the game and would provide a refund of approximately 1.3 million dollars to token holders. With this statement, Paul also expressed that he was disappointed due to the way the matter was handled within the company.

Logan Paul's representative, in a statement, indicated that they were not aware of any arbitration process. Following the events being on the agenda and the TIME news, Logan Paul's legal representative Jeffrey Neiman said, "When all the facts come out, it will be seen that Logan always acted with good intentions." According to what Neiman conveyed, malicious individuals took over the project. Furthermore, Neiman is confident that all fraud allegations will be proven baseless.

LOGAN PAUL AS AN NFT COLLECTOR

The increasing popularity of the crypto market in recent years has led many well-known names to become crypto investors and NFT collectors. Logan Paul had a collection worth over 2 million dollars in 2021 by buying more than 100 NFTs. Logan Paul's NFT collection was ranked 4th.

LOGAN PAUL'S CRYPTO VENTURES

Beyond being a crypto and NFT investor, Logan Paul also wanted to build his own projects. Before reaching a definitive judgment about the scope of the projects and Logan Paul's motivation, it is useful to examine each project closely.

CRYPTOZOO

CryptoZoo draws attention with its similarity to both Pokemon Go and Genopets. Users earned the right to buy a virtual egg in NFT format by purchasing the game's Zoo token. After this transaction, the egg would hatch and a hybrid animal would emerge. If you bred one animal with another, you would have an even rarer and more valuable animal. Then, users would have the opportunity to convert the animal NFT in question into crypto and cash.

Paul announced that he would invest 1 million dollars out of his own pocket to produce the game where the NFTs would be used and to include the field's leading artists and engineers in the project. On September 3, 2021, the first 10 thousand NFTs of the project sold out in minutes. Logan Paul's mention of the project on his podcast, social networks, and in the media contributed greatly to the rapid sell-out.

Despite this massive interest, the project could never be brought to life. While the team that would bring the game to life constantly postponed the dates they gave, they were giving vague answers to questions from the community.

Logan Paul, on the other hand, began to withdraw from the project quietly. Stating in April 2022 that his contribution to the project was super minimal, Paul announced that the project had regressed due to malicious individuals. Saying that he was trying to fix this situation, Paul stated that he continued his support for the project to be fixed.

It was seen that different developer teams were included in the project in the last months of 2022, but the teams left the project after a while.

Stephen Findeisen, who does journalism on YouTube, published a 3-part video series on December 17, 2022, reporting that the founders of the project lied to investors and each other. Findeisen also emphasized that investors lost thousands and hundreds of thousands of dollars.

While Logan Paul threatened Stephen Findeisen, he promised once again that he would fix the CryptoZoo project. However, the fans' belief in this matter has run out. On January 15, lawyer Tom Kherkher submitted the first arbitration request against Paul and other CryptoZoo founders.

Tom Kherkher hopes that Paul Logan's legal team will contact him and reach an agreement that will compensate for the victims' losses. In this way, both parties can avoid long legal processes. Kherkher states that no one from Paul Logan's legal team has contacted him yet.

DINK DOINK

Dink Doink was a Meme coin promoted by Logan Paul. At this point, let's state that Meme coins are based on a popular Meme on social networks and gain value solely based on demand. Elon Musk's Dogecoin tweets and the rises they created in the value of the coin in question explain this concept in the best way.

Actually, all markets are based on demand, but we can say that meme coins have very few legal regulations to protect their buyers. In addition, not being backed by real value makes meme coins no longer an investment tool for the buyer and makes them riskier.

Let's come to the story of Dink Doink. Introducing Dink Doink on his podcast and Twitter account in June 2021, Logan Paul signaled that he would invest in this coin. On the other hand, Paul did not disclose to his followers that he contributed to the development of the project. Moreover, Paul held a large amount of Dink Doink before it was launched.

The value of the coin, which was developed with Logan Paul's roommate Jake Broido, fell to one cent. Following this situation, Paul distanced himself from Broido and Dink Doink. So much so that he described this project as the "project from hell" in an interview he gave. He also stated that he never sold his tokens or made a profit from the project.

REMARKABLE WALLET MOVEMENTS

The examination by Evan Spicer, director of cryptocurrency research at MyChargeBack, presents data in the opposite direction. Spicer examined a crypto wallet that bought more than 120 trillion DINK tokens in the days before the coin was officially launched in June 2021. According to what Spicer conveyed, in July, while the coin was trading publicly and still maintaining its value, this wallet began to cash out large amounts of DINK for more stable cryptocurrencies such as BNB and Tether.

According to Spicer's research, in August, the wallet sent 36.5 Ether directly to Logan Paul's public account. At this point, let's state that almost all of the Ether in the account at that time was worth more than 100 thousand dollars.

According to what Spicer shared, there is not enough evidence that Logan Paul controlled the first wallet mentioned. Still, it is emphasized that the first wallet had a close relationship with Paul's public wallet. The fact that the first wallet used mixers draws attention to suspicious activities. By the way, let's add that 95 billion Zoo tokens were gifted to the same wallet before CryptoZoo was launched. In short, the owner of the wallet must be someone who was involved in both Dink Doink and CryptoZoo projects at an early stage.

MyChargeBack CEO Aaron Lazor compared the wallet movements to other investment fraud activities that the company usually investigates. Logan Paul and his representatives prefer to maintain their silence by refusing to make a statement about Dink Doink.

We had previously reported to you that Liquid Marketplace allows you to add NFTs to your portfolio with joint ownership in a fractional manner. In this project, Logan Paul adopted an approach similar to what we saw in other projects.

Initially, Paul shared the project on his social accounts. Following the posts, the marketplace was met with intense interest from investors. While this situation resulted in prices rising suddenly, the lack of support for the marketplace led to the stagnation of the market offered through the marketplace. Then, Logan Paul stopped promoting the project. Logan Paul has not made a post about Liquid Marketplace on social networks or the Discord server since July.

In June, some users in the marketplace expressed the stagnation in Liquid Marketplace. Users who lost money while staying on the platform started to leave Liquid Marketplace one by one.

The institution's CEO, Ryan Bahadori, stated that they preferred organic growth instead of proceeding through Logan Paul.

Meanwhile, Logan Paul continues with his new NFT project called 99 Originals. The fate of 99 Originals is not yet known.

FAMOUS FOOTBALLERS ALSO BECAME THE FACE OF CRYPTO ADS

Finally, world-famous Portuguese football star Cristiano Ronaldo is facing a 1 billion dollar lawsuit due to crypto ads. Victims who lost their money claimed that Ronaldo, who advertised Binance, misled them. The NFTs in the CR7 series, the cheapest of which was sold for 77 dollars, are currently worth 1 dollar.

A group of cryptocurrency investors filed a criminal complaint against Portuguese footballer Cristiano Ronaldo.

It was alleged that Ronaldo advertised the cryptocurrency exchange Binance in 2022 and that this situation misled them.

In the criminal complaint, compensation exceeding 1 billion dollars was demanded from Ronaldo. The plaintiffs accuse Ronaldo, whom they state has investment experience, advisors, and resources, of participating in and aiding the sale of unregistered securities.

With the NFT partnership that Ronaldo and Binance made in 2022, the star footballer promoted the NFT collection produced for him on his social media accounts.

The cheapest NFT in the CR7 series was offered for sale at 77 dollars. Within a year, the value of these NFTs fell to 1 dollar. According to the lawsuit file, Binance searches on the internet increased by 500 percent due to the promotion made by Ronaldo, who has a total of more than 800 million followers on social media accounts.

The class-action lawsuit is still at the application stage; there is no court that has accepted the file created by the plaintiffs.

The application was made one week after Binance was fined in the USA.

NFTS TURNED INTO TRASH

NFTs are virtual assets in digital environments. These products, which emerged with the crypto rise during the pandemic period, can be bought and sold like securities. 79 percent of the NFTs sold at that time turned into trash. It is estimated that NFTs, which reached a market size of 17 billion dollars at that time, lost 95 percent of their value and turned into trash.

US COURT REMOVED BINANCE CEO

Binance had recently agreed to pay a 4 billion dollar fine due to the sale of unregistered securities. Changpeng Zhao (CZ), the founder and CEO of Binance, one of the most powerful names in the cryptocurrency world, also agreed to resign. In addition, CZ will also pay an additional 53 million dollar fine.

WILL THERE BE A LEGAL REGULATION?

General legal rules apply to this type of fraud. There is no special regulation for now, but there are also efforts to enact laws.

Will new policies come from the finance and banking sector?

It is highly likely that the insurance of digital assets will be talked about more in the future.

Lawrance Carrel, in his article in Forbes, includes this quote from Adam Morris, co-founder of NFT Club, an NFT education site, and writes that the insurance industry is creating new policies to protect NFTs against fraud:

“NFT fraud is becoming increasingly common as ownership rates increase and the complexity of the technology makes it easier for scammers to target investors.”