The booming non-fungible token (NFT) market may seem like an attractive place for crypto-criminals looking to make a quick buck, but new research from Chainalysis shows that NFT crimes are less lucrative and more complex than other types of crypto-crime.
In a report released on Wednesday, a blockchain research firm looked into two types of NFT-related crimes — fictitious trading and money laundering — that occur in the Ethereum NFT ecosystem.
The popularity of the NFT market has skyrocketed in the past year. In 2021, Chainalysis tracked $44.2 billion worth of cryptocurrencies sent to NFT-related smart contracts, up from $106 million a year earlier
And as the crypto market grows, so do crimes using cryptography, such as ransomware attacks and fraud.
“It’s not a good idea to do crime in NFT because it’s expensive,” said Kim Grauer, head of research at Chainalysis. “It’s hard to guarantee that you will make a profit if you want to use [NFT] for money laundering, all you can do is trace it and see who owns the NFT. There are things that make the NFT space unattractive to criminals.”
Phishing trading – the practice of buying and selling the same asset to create artificially inflated trading volume and manipulate the asset’s price – has become commonplace on NFT marketplaces such as LooksRare
Chainalysis found that more than half of the phishing sellers actually lost money as the cost of mining rose and their bogus trading failed to generate interest from real buyers
Money laundering through NFT marketplaces also gained momentum in 2021, with $2.4 million sent from fraudulent wallets.
However, compared to the proceeds of other cryptocurrency scams, NFT scams are only a drop in the ocean of the $8.6 billion in cryptocurrency money laundering.