- Elliptic said that the last month of July witnessed the highest number of NFTs stolen over the last year.
- Elliptic also shares the details of money laundering through NFT platforms and the rampant use of crypto mixers like Tornado Cash.
The NFT market as well as trading activity skyrocketed over the last year with strong demand for non-fungible tokens (NFTs). Some of the biggest businesses across fashion, technology, and gaming have been exploring different use cases for NFTs.
On Wednesday, August 24, blockchain research firm Elliptic published a report showcasing the dark side of the NFT market. The report notes that crypto hackers and thieves stole over $100 million worth of NFTs over the last year through July.
Elliptic adds that NFT scams have been skyrocketing every month with July 2022 witnessing the highest number of NFTs stolen. Major security lapses happen through social media and this account for 23 percent of NFT thefts so far in 2022.
As per the Elliptic report, the crypto thieves received an average of $300,000 per NFT scam. However, it believes that the true scale of NFT crimes could be even higher considering that not all crimes have been publicly reported.
Crypto scams have been occurring in the market over the last few years. However, regulators are now getting increasingly concerned about the use of crypto in cybercrime. As per Elliptic, the amount of money laundering via NFT-based platforms stands at $8 million. However, $329 million worth of funds in the NFT market have come through services such as crypto mixers. In the report, Elliptic notes:
Tornado Cash, a US-sanctioned mixer, was the source of $137.6 million of cryptoassets processed by NFT marketplaces and the laundering tool of choice for 52% of NFT scam proceeds before being sanctioned by OFAC in August 2022. Its prolific use by threat actors engaging with NFTs further emphasizes the need for effective sanctions screening by NFT platforms.
Growing regulatory measures around NFT
As the number of NFT-related scams increases in the market, regulators are making the move to transactions in the market. Last month in July, the United States Office of Government Ethics (OGE) issued an advisory over NFT transactions. It noted that NFT investments worth $1,000 must be disclosed as long as they are “held for investment or production of income”.
Regulators in Europe are taking similar measures! The European Union recently proposed that non-fungible tokens (NFTs) must come under the markets in crypto-assets (MiCA) laws. This way, NFTs will have the same laws as applicable to cryptocurrencies.
Besides, there’s also a strong observation on celebrities who have been promoting NFTs. Recently, consumer watchdog group Truth in Advertising has called out 17 celebrities including Justin Bieber, and Paris Hilton for promoting NFTs without revealing their profits.
Amid the crypto market crash this year, NFT sales have been on a decline. During the crypto market crash of Q2 2022, NFT sales tanked by a staggering 40 percent. Despite the slowdown, bad actors continue to remain active in the hunt for new theft opportunities.