Scams remain rampant in the NFT market even as it declines, with July seeing the highest number of reported stolen NFTs on record, London-based blockchain research firm Elliptic said in a report.
Thieves stole more than $100 million worth of non-fungible tokens in the year to July, blockchain research firm Elliptic said on Wednesday, as the fast-emerging digital asset emerged as a new front in the crypto hack problem.
NFTs are blockchain-based assets that represent digital files such as images, videos, or text.
The market surged in 2021 as crypto-rich speculators spent billions of dollars on assets, hoping to cash in on rising prices. But since cryptocurrency prices crashed in May and June this year, NFT prices and sales volumes have plunged.
Scams remain rampant in the NFT market even as it declines, with July seeing the highest number of reported stolen NFTs on record, London-based Elliptic said in a report.
Security compromises via social media have increased, accounting for 23% of NFT thefts in 2022, he said.
Thieves received an average of $300,000 per scam, Elliptic said. The true scale of NFT thefts is likely to be even higher, given that not all crimes are publicly reported, he added.
Hacks and scams have plagued the crypto industry for a long time, while regulators around the world are increasingly concerned about the use of crypto assets in cybercrime.
Elliptic estimated the amount of money laundering on NFT platforms at just $8 million. But nearly $329 million in funds in the NFT market came from services such as so-called cryptocurrency mixers, which are designed to hide the origin of the funds, Elliptic said.
One such mixer, Tornado Cash, was used to launder just over half the proceeds of NFT scams, Elliptic said, before being sanctioned by the United States this month.
“NFT-based services are increasingly under threat from sanctioned entities and state-sponsored exploits,” Elliptic said, citing a $540 million theft in April that US officials linked to the North American group. Korean Lazarus.