Yahoo News HMRC seizes NFTs in £1.4m fraud case
Britain's tax authority has seized non-fungible tokens (NFTs) for the first time ever amid growing concern that a boom in digital art is opening new doors for fraudsters to hide money.
HM Revenue & Customs (HMRC) seized three NFTs as part of a probe into an attempt to defraud the taxman of £1.4m ($1.9m).
The authority also arrested three people in the alleged VAT repayment fraud.
The suspects, who cannot be named, were using "sophisticated methods" to hide themselves, including stolen identities, pre-paid mobiles, false Virtual Private Networks (VPNs) and invoices, and pretending to be a legitimate business, according to HMRC.
"We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets," said Nick Sharp, HMRC's deputy director of economic crime.
The action served as a "warning to anyone who thinks they can use crypto assets to hide money", Sharp added.
HMRC said it secured a court order for the three seized NFTs and £5,000 in other crypto assets while an investigation continues into the suspected fraud involving 250 alleged fake firms.
Read more: NFTs: The birth of a $27bn marketplace
The NFT market has become popular in recent years, drawing in a number of wealthy consumers since they emerged in around 2014.
The craze for NFTs saw the market reach $27bn (£19.bn) in 2021, as people across the world continued to shift to digital collectibles during the pandemic.
NFTs are unique, one-of-a-kind crypto assets that enable collectors to authenticate, own and trade original authenticated versions of special digital goods using blockchain technology.
They can be anything digital from drawings to videos or GIFs, but they can also be applied to a physical item such as coins or a stamp.
In economics, a fungible asset is something with units that can be readily interchanged, in the same way money can. You are able to swap a £10 note for two £5 notes and it will have the same value.
When a NFT is bought, the person purchasing receives a certificate secured in blockchain technology, which makes them the owner of that specific digital asset. Specifically, NFTs are typically held on the Ethereum (ETH-USD) blockchain, but other blockchains support them too.
This cannot be replicated or substituted, and it can only have one official owner at any given time. NFTs are transparent and no one is able to modify the record of ownership or copy/paste a new NFT into existence.
