Saturday, July 2, 2022

Need of policing NFT increases as new fraud cases emerge

The Takeaway:

So yeah, crypto might be getting a bit rowdy as the amount of fraud NFT cases reach a new high with the system being decentralized causing the emergence of many fraudulent users scamming others for NFT.

This called for a growth of users demanding policies to police the NFT market and to bring an agency to do so. Of course, this does defeat the purpose of the Decentralization, which has acted as a double-edged sword and led to the current state of matters for the NFT market.

The Rise of NFT:

The NFT or non-fungible tokens were supposed to be the chosen ones, to bring forth the semblance of a guarantee of uniqueness.

The total NFT market as tracked by Crypto Slam (1) has grown exponentially from a little more than US$54 million in monthly sales in January 2021 to US$3 billion in May 2022. 

Furthermore, it is said to grow by US$140 million by 2026 as forecasted by TechNavio a unit of Infiniti Research Pvt Ltd. About 43% percent of its growth came from the Asia Pacific region with the main contenders being Singapore, China, and the Philippines.

Of course, such a rise in interest in the industry has also led to the emergence of some bad actors.

 

Attack of the Scammers:

In early June the US department of justice charged a former NFT employee of the NFT market – Open Sea with wire fraud and money laundering for allegedly using insider information to trade NFTs.

Nate Chastain had allegedly used insider knowledge as to which NFTs will be placed on the platform home page to trade NFTs at 2 to 5 times, their original value. He also used multiple wallets to hide his actions.

In March, Ethan Vinh Nguyen and Andre Llacuna, two 20-year-old creators behind an alleged US$1 million NFT scam, were charged with conspiracy to commit wire fraud and money laundering.  [2]

They were caught siphoning off funds from their investors after their investors had poured money into their Frosties NFT collection. These two were caught trying to repeat their scam with a second set of NFTs titled ‘’Embers’’.

 

A New Hope:

In a recent interview with Forkast, Yehuda Petscher, a strategist at an NFT aggregator CryptoSlam told them that

“I was always hoping that the space would be able to police itself and we wouldn’t need lawyers involved in regulations and all of those things, but we really do. it is time to clean up this mess

A key challenge for courts and regulators is enforcement in an industry that is decentralized by nature. To combat this some blockchain enthusiasts, believe that the only governance in such a system should be that of the software ‘Code’ or the philosophy that ‘Code is law’.

Some countries have started passing laws to provide NFTs with the same rights as that of “Property” which allow the courts to put to trial the NFT scammers, though this does defeat the purpose of creating a decentralized system that was promised by the NFT market.

In the end, due to the rising cases of fraud in the NFT market, the purview of the law might be needed to be bought back.

Disclaimer: The article reflects the opinions of the author and is not representative of Chaintimes’ views.
The article does not offer any investment advice. User discretion is advised when investing in or trading with cryptocurrency. Extensive and diligent research should be carried out by the reader before making a decision.

Hussain Sabunwala
Hussain Sabunwala
Hussain Sabunwala is a student at Symbiosis Institute of Technology. He is interested in how the internet works, Blockchain, and he is much more inclined to working in the field of Electronics. Writing helps him learn more about the different fields out there and how and why they work the way they do. He is always free to talk in length about many such topics and he is a bag of obscure facts collected and preserved in his many years in this planet.

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