UK Tax Authorities’ Historic Seizure of NFT Highlights New Form of Crypto Crime

In a historic development, Her Majesty’s Revenue and Custom’s office seized three NFT tokens that were being used in a £1.4 million tax evasion scheme. Three people were charged with a scheme to try to get back more VAT through false identities, forged invoices, and unregistered phones. The authorities tracked down 250 fake identities and operations used by the suspects to cover their tracks.

Although there have been many cases in which law enforcement crypto units have tracked down suspicious bitcoin transitions, NFTs represent a new phase of financial crime on the blockchain. 

Ready to Face the NFT Challenge

However, HMRC have made it clear that they are ready to face that challenge and to combat any instances of hiding taxable income through cryptoassets. Nick Sharp, HMRC’s deputy director of economic crime, said in a statement, “Our first seizure of a non-fungible token serves as a warning to anyone who thinks they can use crypto assets to hide money from the HMRC.” 

The HMRC are the first authorities in the UK to seize NFTs. There were a total of three NFTs, each one representing digital art as well as an additional £5,000 in digital currency. The NFTs still need to be appraised to determine their actual value. 

NFTs – The New Face of Crypto Crime

NFTs, non-fungible tokens, are unique digital assets created to track the value of virtual creations, such as works of art or digital games. NFTs are used often in the art world to establish ownership of intellectual property but ironically, many NFTs are overvalued or may even be worthless forgeries. 

However, fake NFTs have not stopped the demand. An estimated £30 billion NFTs were sold in 2021, according to MSNBC. Regulators have expressed concern about the lack of oversight of cryptocurrency and crypto assets, but the recent case involving HMRC demonstrates that, even though regulations are still not in place to govern the blockchain, law enforcement and crypto units are developing strategies to deal with the use of cryptoassets for fraud or money laundering. 

Tracking Down Cryptoasset Schemes

Crypto experts are expanding their repertoire by investigating and tracking down fake schemes involving NFTs. Like cryptocurrencies, NFTs are often elusive, because owners can disguise their names and locations. However, crypto trace technology and methods can be used to create investigation reports that give law enforcement a head start. 

The MyChargeBack team consults with clients and gathers information about cases. We then create apply crypto trace solutions and coin tracking technology that will examine bitcoin transactions and establish patterns that can identify the holders of suspicious bitcoin wallets. We put together crypto investigation reports that clients can present to police and crypto exchanges.

With evidence from these reports, the authorities, as in the case of the HMRC, can obtain a court order to justify freezing NFTs and bitcoin wallets and put a stop to money laundering. From there, the authorities can return funds to victims.   

If you have lost money to a cryptocurrency scheme, seek fund recovery assistance right away. Consult with MyChargeBack experts and get started with your fund recovery claim. We have extensive working knowledge and relationship with law enforcement agencies as well as experience with the dynamics of crypto recovery and can improve our prospects of getting your money back.