HMRC has arrested three people suspected of attempting to £1.4M NFT fraud

UK law enforcement officers have seized 3 Non-Fungible Tokens (NFTs) from a company as part of UK tax investigations. This seizure was made at the National Crime Agency’s (NCA) request due to suspicions of fraud involving 250 alleged fake companies.

NFTs are non-physical assets in the digital world that you can buy and sell. You can buy and sell digital tokens (called NFTs) using traditional or cryptocurrency that you might already be familiar with. Many consider cryptocurrencies like Bitcoin the digital answer to currency, but there are also plenty of skeptics. These doubt that NFTs are the long-awaited digital answer to collectibles due to their history of being flashy toys susceptible to bubbles.

HMRC has made accusations of NFT fraud against one of its alleged suspects. They were found to have used sophisticated measures to hide who they are with false identities, fake addresses, and pre-paid phones. Fraud schemes such as these are becoming more commonplace and should be a cause for concern.

Nick Sharp, deputy director of economic crime, said the first seizure of an NFT “served as a warning to anyone who thinks they can use crypto assets to hide money from HMRC.”

“To keep up with the criminals and people looking to conceal assets, we constantly adapt to new technology.”

They also said that while their investigation continued, it secured a court order to detain the £5,000 worth of crypto assets and three unvalued digital artwork NFTs.

How do NFTs work?

Traditional works of art such as paintings are valuable precisely because they are kind, but digital files can be easily and endlessly duplicated.

A debate is whether traditional paintings or digital files are worth more. A digital file can be replicated infinitely, but the value of an image comes from being individual. Tokens represent the same object you would like to trade with people. 

Like cryptocurrency, a record of who owns what is stored on a shared ledger – or blockchain – is kept highly secure.

It’s impossible to forge records because the ledger is being actively monitored by thousands of computers worldwide. In September last year, a picture of a woman named Chloe Clem, adapted into a popular internet meme, was sold for over $74,000 (£54,000).