HMRC seizes first NFTs in large scale fraud case
While cryptocurrencies are quite popular for money laundering, non-fungible tokens (NFTs) are now also increasingly being used for criminal activities. It has become clear that the British authorities have seized three NFTs as part of an investigation into tax fraud.
The three suspects have reportedly attempted to defraud HMRC, the UK tax authorities, for £1.4 million. To hide their identities, the suspects used as many as 250 fake companies, fictitious identities, prepaid phones, VPNs and other tools to remain anonymous, apparently to no avail.
Three NFTs were seized
Her Majesty's Revenue and Customs (HMRC), the British tax authorities, has seized three NFTs from the suspects. The HMRC claims to be the first UK agency to seize an NFT, and three people have been arrested on suspicion of attempted government defrauding.
The accused reportedly attempted to reclaim more VAT than they owed by concealing their identities using a combination of stolen identities, unregistered phones and fraudulent invoices. According to HMRC, the plan involved 250 alleged fake entities. Nick Sharp, HMRC's deputy director of economic crime, says the seizure of the NFTs serves as a “warning” to anyone who believes cryptocurrencies can hide their money from the tax authorities:
“This initial 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 technology to ensure we keep up with how criminals and evaders try to hide their assets.”
Sharp also reports that HMRC are "constantly adapting to new technology" to ensure it stays "on par" with criminals and tax evaders who try to hide their assets. HMRC received a court order to seize the unvalued NFTs and crypto assets worth approximately £5.000.
Seizure of cryptocurrencies on the rise
High-profile police seizures are becoming more common as the value of cryptocurrencies rises. For example, it was announced last week that the US Department of Justice (DoJ) seized 120,000 Bitcoins worth over $3.6 billion (£ in connection to the Bitfinex hack dating back to 2016, showing that the public nature of blockchains makes crypto unsuitable for fraud, theft and other types of crime. This latest case in the UK however is one of the first high-profile repossessions of NFTs.
Recently, the US Treasury Department also 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 among 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 firms increased 130-fold. Despite its growth, the new market has been marred by controversy, especially in the areas of money laundering and fraud. For example, there are several stories in which so-called influencers have defrauded their fans by launching simple NFTs.