UK: HMRC Seizes Three NFTs Connected to a $1.89M Fraud Case
The UK tax authority, HMRC, has confiscated three Non-Fungible Tokens (NFT) as part of an investigation into a suspected VAT fraud implicating 250 purported fake firms. According to HMRC, three persons have been arrested for allegedly attempting to defraud HMRC for £1.4 million. The authority claimed it was the first law enforcement agency in the United Kingdom to seize an NFT.
What are the Charges?
The suspects in the HMRC NFT fraud case are accused of using “sophisticated methods” to conceal their identities, including false and stolen identities, false addresses, pre-paid unregistered mobile phones, Virtual Private Networks (VPNs), false invoices, and pretending to engage in legitimate business activities, according to HMRC.
These digital tokens first appeared in 2014 and are certificates of ownership for virtual or physical goods. NFTs contain a unique digital signature, allowing them to be purchased and traded with traditional or cryptocurrencies, such as Bitcoin.
Whereas Bitcoin has been acclaimed as a digital alternative to cash, NFTs have been heralded as a digital alternative to collectibles. Many skeptics believe they are a bubble waiting to burst.
The first seizure of an NFT “serves as a message to anyone who believes they can use crypto assets to hide money from HMRC,” according to Nick Sharp, deputy director of economic crime.
HMRC said it has a court order to hold the confiscated crypto assets, estimated at around £5,000, and three digital artwork NFTs, which have not been valued while its investigation is ongoing.
How do NFTs work?
Conventional works of art, like paintings, are valued because they are one-of-a-kind. However, digital files may be simply and indefinitely replicated.
NFTs can be used to “tokenize” artwork, resulting in a digital certificate of ownership that can be bought and sold. The tokens can be used to represent a wide range of real-world objects, such as art, music, and movies.
A shared ledger known as the blockchain keeps track of who owns what, analogous to crypto-currency. Hackers cannot fabricate the records as the ledger is maintained by thousands of computers worldwide. Smart contracts that, for instance, provide the artist a percentage of future token sales can be included in NFTs.
Fraud Plagues NFT Marketplace
OpenSea, one of the most popular online NFT marketplaces, stated this week that more than 80% of the NFTs created using its free tool are spam, frauds, or otherwise fraudulent. As NFT and crypto fans were outraged by the limits, OpenSea reversed its decision to limit free NFT minting in a recent Twitter thread. Still, the business did explain why it decided the first place.
Infringement on intellectual property rights is nothing new in the NFT world. For months, artists have been screaming about theft and hacking. Both are hoaxes, and just last week, famed rock artist Ozzy Osbourne unintentionally assisted in the theft of thousands of dollars in cryptocurrency holdings from his fans.
The goal of cryptocurrency was to be decentralized, but it’s evident that this isn’t working out for talented artists and consumers of fraudulent or spamming NFTs.
