The phrase “Metaverse,” also known as “web 3” or “web 3.0,” refers to all of the various ways that humans might be able to interact socially in the “cyber world.”
The Metaverse sees the fusion of new technologies like blockchain, virtual, and augmented reality brought together in a new environment more interactive than the traditional 2D web we have traditionally been exposed to. This includes VR headsets, avatars, and wearable NFTs.
For some, the notion is that everything will take place on an entirely decentralized version of the internet, where users/players would create and own the platforms and apps.
Metaverse Fraud
Although the Metaverse is a novel idea, cryptocurrencies and blockchains have been around long enough for us to be familiar with many of its problems.
Although there may be ambitions for the Metaverse to go beyond blockchain, its fundamental component appears to be this technology, which, regrettably, scammers have discovered to be highly helpful for using to launder money, steal identities, and run scams.
Due to a lack of KYC safeguards on some platforms and a lack of regulatory oversight, fraudsters can experiment with new techniques and, to some extent, attempt to defraud businesses and customers without taking any risks.
With a record-breaking $7.8 billion in blockchain-based transaction crime in 2021 and the endless possibility of hacking, there is some risk to the numerous metaverses.
Some Examples of Metaverse Fraud Work
Any business that provides cryptocurrency-based services, as well as those who decide to explore the Metaverse and the larger crypto-adjacent economy, face a variety of hazards.
In industries close to the Metaverse, there are many schemes and approaches in use or about to be, and analysts predict the emergence of new strategies specific to these platforms.
· Multi-accounting: Fraudsters may attempt to create many accounts on a specific metaverse site to misappropriate promotions or launder money obtained unlawfully. One such scenario involves a fraudster purchasing an NFT with dirty money from another account they already control to withdraw once the NFT is sold to an honest user.
· Irreversible transactions: Due to the open-record information on the blockchain, cryptocurrency is renowned for its transparency. When compared to offline transactions, this goes against some customer expectations. A transaction, however, may be virtually hard to undo once completed.
· Influencer fraud: Celebrities like Elon Musk and Jeff Bezos had their Twitter accounts hijacked as part of a bogus giveaway in one well-known case of cryptocurrency influencer fraud. In the future, marketing for the Metaverse could look similar.
· Virtual world fraud: It is important to note that many of the difficulties raised above have existed in virtual worlds like The Sims, World of Warcraft, and Second Life long before any such thing as cryptocurrency existed. There is a case to be made that suggests the industry gaming businesses should be somewhat ready.
Decentralization Challenges
Due to fraudsters’ ability to use tools like tumblers to delete links from themselves and the original source, the decentralized nature of crypto and NFTs might make monitoring phishing or malware assaults challenging.
Additionally, OSINT researcher and artist Kirby Plessas contended in a podcast with ACFE that more shrewd criminals would take advantage of the commotion to utilize NFTs and cryptocurrency to launder money. Fraudsters either create their own NFT companies and possibly load them up with Ethereum, convince people to potentially preload into the marketplace they make and then shut it down as an exit scam, for example, or pretend to be the guide to assist someone in creating an NFT, for example, to create some before they hijack and take over the NFT account.
However, the platforms that host these worlds must ensure that their defences are easily adaptive to the new fraud, identity theft, and laundering tactics that will undoubtedly arise. The Metaverse offers marketers tremendous chances to engage their customers.
Additionally, individuals will probably desire several accounts to separate their personas from their prospective professional identities from a professional standpoint.
Common Metaverse scams and how to avoid them
Phishing Schemes and Unsettling Pop-up Windows
You must create an Ethereum blockchain wallet to purchase your product. For those who collect NFTs, MetaMask may be the most well-liked Ethereum wallet. However, a recent phishing scheme that used fake adverts to solicit users’ private wallet keys or 12-word security seed phrases targeted MetaMask users (a big red flag). Additionally, there are fake harmful pop-ups that operate through Discord, Telegram, and other open forums that connect to login pages for well-known websites like MetaMask.
A malicious party can steal all of the cryptocurrency in your digital wallet if they manage to obtain your private information through a phishing effort.
How to Avoid It
Typically, you will need your seed phrase to create a physical backup of your crypto wallet or to restore it. Never enter any information into a pop-up window, even the MetaMask one. Never use links, pop-ups, or your email to enter your information while transacting with cryptocurrencies; constantly go straight to the verified website. Never share your seed word with anybody; don’t even take a picture of it to save on your phone. Instead, please write it down on paper.
Fake Personas and Catfishing
It’s simple to fall victim to catfishing because NFT sales are conducted digitally, and all marketing is done via social media. It can be challenging to determine which popular NFT groups are genuine or not since influencers and celebrities frequently work with them to promote them.
How to avoid it
Never reply to a direct message from someone who identifies as a founder, celebrity, or influencer. In the NFT community, it is accepted protocol that C-level employees should never DM you unless you have first sent them a message or have reached an explicit understanding in a public Twitter thread or Discord channel. In the NFT universe, the same rule applies: don’t open links or divulge any secrets if someone DMs you first. Similar to when you were a child, your parents warned you never to hand out personal information to a telemarketer who contacted your home.
Pump and dump scams
In the bitcoin and NFT realms, pump-and-dump scams are regrettably becoming more predictable. The phrase describes a situation where several people acquire many NFTs or pieces of cash, artificially inflating demand. Once they are successful, the con artists pay high prices, leaving others who didn’t participate with worthless possessions. Similarly, you may have also heard the term “paper money” concerning NFT ventures that aren’t technically fraudulent but have restricted liquidity due to a select group of pushy customers.
How to avoid it
Examine the background and financial records of any project you are considering. The transparency of blockchain technology is beneficial in this situation. View the volume of transactions and purchasers for the NFT collection on OpenSea or any other NFT marketplace. You can view each incoming and departing Ethereum blockchain transaction with EtherScan.
Join the project’s Discord server and follow it on Twitter as well. A project needs many interested investors and collectors and an active community where people interact, participate, and exchange information to have excellent liquidity and to last artistic or communal value.
Bidding scams
The secondary market is where most bid-rigging scams occur after you’ve bought your NFT and are looking to sell it to the highest bidder. The cryptocurrency bidders may change after you offer your NFT for sale without informing you. For your preferred NFT, you may obtain $5 rather than 5 ETH (approximately $15,000–$20,000).
How to avoid it
Verify the money used again, and never accept a bid less than what you desire.
NFTs that are fake or plagiarized
Remember that owning intellectual property (IP) over a work of art does not mean you may mint it as an NFT. Whether or not they possess the IP rights to the image, anybody may convert any snapshot or image into an NFT thanks to OpenSea’s user-friendly software. Scammers and other undesirables might steal an artist’s creation and create a phony OpenSea account to post and auction off bogus artwork. Once the community learns what the con artist is up to, your NFT would become practically worthless, and there would be no way to get your money back.
How to avoid it
Ensure your artwork is from a verified account before buying an NFT from any marketplace. On OpenSea or other NFT markets, look for the blue check mark next to the artist’s profile photo. If there isn’t, try searching for the artist on Twitter, their website, or another social media platform. Ask them personally if the piece of art you wish to purchase is theirs and if your user profile is appropriate. Inquire with other community members and check whether the musician or NFT project has a Discord channel.
After selecting a virtual property, you may learn more about it on one of the numerous platforms run by third parties that serve as resellers, such as metaworksreality.com. If any sales history is available, these websites can reveal it to you. They can also let you search for surrounding houses that might make good comparisons.
It would help if you created a digital wallet to store your digital assets, including the cryptocurrency you’ll use to pay for your purchase. Your wallet choice will be influenced by the metaverse platform you’re utilizing. Each website will include the preferable links and how to connect them.
You cannot operate alone since new frauds constantly sweep the Metaverse scene. It’s essential to network with other enthusiasts since being updated is the most excellent way to prevent both new and old Metaverse frauds.
Along with the moral ambiguities of the Metaverse, there are several well-known scams where the perpetrators are extremely obvious, and the damages are substantial. Maintain vigilance, make the best-informed choices, and never risk more money than you can afford to lose.
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References
Nikita S., (Jun. 22, 2022), How to buy LAND in the Metaverse,
Retrieved from: https://moneymint.com/how-to-buy-land-in-the-metaverse/
Steffi S., (May. 30, 2022), Metaverse real estate is booming – here’s what you need to know,
Retrieved from: https://propertyupdate.com.au/metaverse-real-estate-is-booming-heres-what-you-need-to-know/
Alexey A., (Mar. 29, 2022), What will it take to stop fraud in the Metaverse,
Retrieved from: https://www.information-age.com/what-will-it-take-to-stop-fraud-in-metaverse-123499073/
Eamon J., (May. 26, 2022), Cybercriminals target investors with phishing scams,
Retrieved from: https://www.cnbc.com/2022/05/26/cybercriminals-target-metaverse-investors-with-phishing-scams.html
Tamas K., (Feb. 24, 2022), The risk of fraud in the Metaverse,
Retrieved from: https://www.eweek.com/security/fraud-in-the-metaverse/
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