Wednesday, May 29, 2024

NFT marketplace had to cease sales due to “plagiarism” and “wash trading” difficulties.

Non-fungible token or NFT is a digital asset which may represent art, music and videos. NFTs are primarily used for buying and selling digital artworks. NFT sales rose to USD 25 billion in 2021.

NFT frauds are rising at menacing rates. Cent, which is an American NFT marketplace has recently suspended trading due to reported frauds. The biggest NFT marketplace, OpenSea has admitted that estimated 80 % of its traded items are plagiarized or fake. In the first week of January this year google search item “NFT Scam” reached an all-time high.

Wash Trading

“Wash trading” is one mode of fraudulent activity in which the value of assets is inflated falsely. Here a seller is on both sides of the trade and he creates a false picture of the asset’s value and liquidity. This is possible because a single user can create multiple Ethereum wallets. Tools are now available to detect such activities. Analysts have found that such acts of fraud are now large scale.

Minting and minting counterfeit assets

Anyone can create or mint an NFT and own a token. Ownership of a token does not confer ownership of the underlying asset. It appears that many are repeatedly minting and minting counterfeit assets. Three identified problem areas are

1) Selling unauthorized copies of NFTs

2) Making NFTs that belong to others

3) Selling NFTs that resemble a security.

UK tax authority seizes NFTs

For the first time the UK tax authority Her Majesty’s Revenue and Customs (HMRC) has seized three NFTs. This is done as part an investigation of suspected VAT fraud by 250 alleged fraud companies. Taxation rules are different across countries with regard to the crypto space. Such issues are likely to resurface in the days to come.

Cryptured Team
Cryptured Team
The writers team at Cryptured.com is composed of passionate and experienced journalists who cover the latest developments in the crypto and blockchain space. They aim to provide accurate, unbiased and easy-to-understand news and information for their readers, as well as insights and analysis from industry experts. The writers team is always on the lookout for new and exciting stories that can help the general public learn more about the potential and challenges of these technologies.
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