NFTs
NFTs are ‘highly susceptible’ to fraud and scams
O Treasury Department has a warning for NFT fans: use them at your own risk.
The Department released an assessment Wednesday (May 29) finding that non-fungible tokens (NFTs) – while rarely involved in things like terrorist financing – are nevertheless “highly susceptible” to theft and use in fraud and scams.
“Additionally, criminals use NFTs to launder proceeds from underlying crimes, often in combination with other techniques or transactions designed to obfuscate the illicit source of funds,” the assessment stated.
“Criminals can exploit vulnerabilities related to the characteristics of NFTs, the assets or rights they reference, and regulatory frameworks in the United States and abroad.”
Treasury found that cybersecurity vulnerabilities, challenges related to copyright and trademark protections, and exaggerated and fluctuating prices of NFTs – blockchain-based digital assets – could allow criminals to commit fraud and theft related to NFTs and their platforms.
Compounding the problem is a lack of internal controls in NFT companies and platforms to prevent market integrity risks, sanctions evasion, terrorist financing and money laundering.
NFTs emerged from the 2021 cryptocurrency bull market, with advocates touting them as a way for everyday consumers to participate in the digital currency market. Its popularity has since waned, with sales of NFTs falling 63% in 2023.
Earlier this year, GameStop, which revealed an NFT Market in the summer of 2022, he decided to leave the non-fungible token businessciting continued regulatory uncertainty surrounding cryptocurrency.
Meanwhile, the largest crypto market has recovered and with it has come a proliferation of crypto-related crimes.
A March FBI report found that Americans made more than 43,000 complaints about cryptocurrency fraud last year, with losses of Crypto-based frauds and scams jumped to $3.9 billion, a 53% increase year over year.
“These scams are designed to lure targets with the promise of lucrative returns on their investments,” the FBI noted.
Driving this increase is the emergence of “scam factories”, operations in which tens of thousands of illegally trafficked people are arrested and forced to cheat involuntary foreigners.
Among the most popular tactics is “pig slaughter,” where scammers use fictitious identities to develop relationships with victims through dating apps, social media platforms, professional networking sites, or encrypted messaging apps.
The schemes are designed to build trust, usually starting with a romance or confidence scam and evolving into a cryptocurrency investment scam – when the “pig”, once fattened, is “butchered”.
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