While cryptocurrencies are quite popular for money laundering, non-fungible tokens (NFTs) are also increasingly being used for criminal activities. It has emerged that British authorities have seized three NFTs as part of an investigation into tax fraud.
The three suspects have reportedly tried to cheat HMRC, the UK tax authority, out of £1.4million. To disguise their identities, the suspects used up to 250 fake companies, fictitious identities, prepaid phones, VPNs and other tools to remain anonymous, apparently to no avail.
Three NFTs were confiscated
The British tax authority Her Majesty's Revenue and Customs (HMRC) has confiscated three NFTs from the suspects. HMRC claims to be the first UK authority to seize an NFT and three people have been arrested on suspicion of attempted government fraud.
The defendants reportedly attempted to reclaim more VAT than they owed by disguising their identities with a combination of stolen identities, unregistered phones and fraudulent invoices. According to HMRC, the plan included 250 suspected fake entities. Nick Sharp, deputy director of white-collar crime at HMRC, says the seizure of the NFTs serves as a "warning" for anyone who believes cryptocurrencies can hide their money from tax authorities:
“This first seizure of a non-fungible token serves as a warning to anyone who believes they can use crypto assets to hide funds from HMRC. We are constantly adapting to new technologies to ensure we keep up with the way criminals and scammers are trying to hide their assets.”
Sharp also reports that HMRC is "constantly adapting to new technology" to ensure it stays "on par" with criminals and tax evaders trying to hide their wealth. HMRC received a court order to confiscate the unvalued NFTs and crypto assets worth approximately $6,600.
Cryptocurrency seizures on the rise
High-profile police seizures are becoming more common as the value of cryptocurrencies soars. For example, it was announced last week that the US Department of Justice (DoJ) had seized 120,000 bitcoins worth over $3.6 billion in connection with the 2016 Bitfinex hack, demonstrating that the public nature of blockchains crypto unfit for fraud, theft and other types of crime. However, this latest case in the UK is one of the first high-profile withdrawals of NFTs.
The US Treasury Department recently warned against money laundering with NFTs. However, a previous study by Chainalysis showed that the volume sent from suspicious wallets to NFT marketplaces is very small compared to crypto. And even with crypto, the number of suspicious transactions is only 0.1% of the total.
It is worth noting that between 2020 and 2021, the amount of money invested in NFT companies increased 130 times. Despite its growth, the new market has been marred by controversy, particularly in the areas of money laundering and fraud. For example, there are several stories where so-called influencers have cheated their fans by starting simple NFTs.
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