NFTs: The New Frontier for Money Laundering?
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Non-fungible tokens or NFTs are blowing up — Day after day, they are growing in popularity!
But are they for real or are they nothing but a scam?
According to those who are familiar with them, they say they’re being regularly used for money laundering. Reportedly, those who use them do that to clean their dirty money. They do that by creating anonymous NFTs, listing them for sale on the blockchain, buying them from themselves with their anonymous, illicit money, and then turning that money into legitimate currency.
From what I’ve heard and read, the world of NFTs is a dirty world, a world where one can gain everything in a moment, and then lose everything in another.
[Watch my documentary on my YouTube channel https://youtu.be/_t_HXfJC6r0 to find out about the hidden world of NFTs]
Believe it or not, a text message that read “Merry Christmas” was just sold by Vodafone at an auction in Paris in the form of a so-called nonfungible token or NFT for –guess how much — €107,000 or $121,000 to an unnamed buyer. And guess what the unnamed buyer got in return — a digital picture frame displaying the SMS!
If you’ve been reading the headlines about NFTs, you probably have so many questions to ask.
Starting with, what the heck is an NFT?
NFTs are nothing but digital assets. They’re like a receipt that’s irreversible, meaning you cannot change it. They live on the blockchain.
To make them comparable to something that you would already know, it’s like going to a store and buying something, but the purchase that you made is unique, no one else has it, and the receipt has a unique number attached to it, a code, that no one else can decode or change forever.
Creating an NFT does two things: It provides proof of ownership and it guarantees scarcity. The scarcity is really the key part. If you want to sell something that exists only digitally, the problem you’ll encounter is that all things digital can be infinitely copied. NFTs don’t stop the copying. But they allow you to distinguish the copies from the “original.” And they prove, through the ledger, that you own it. Until, of course, you sell it. Does this make sense to you? Not yet?
Just wait…
There’s been a lot of talk around NFTs lately. But if you’re still scratching your head over what NFTs are, I don’t blame you. The damn thing is so confusing. The entire culture around it gives me a headache.
Like you, I started not knowing anything about NFTs, until I finally decided to find out what’s the big deal about them.
In this article (and in my YouTube documentary https://youtu.be/_t_HXfJC6r0), I’ll let you in on the big secret that only those who are making big money from NFTs know about, and they are so desperately trying to hide.
But what are NFTs?
They’re tokens. They’re anything electronic. They are normally JPEGS or digital images that people, for some strange reason I still cannot fathom, are willing to spend a lot of money to own.
They’re traded via the blockchain and contain a little bit of information within their code. This is usually info that says that you own it and how much you bought it for. That’s what fungible means — it’s irreplaceable, one-of-a-kind, it cannot be traded with something else!
Still confused? Let me make it a bit clearer for you.
Remember those registries where you could “buy a star,” and name it after a loved one, and they’ll send you a certificate saying you own that star?
NFTs are something like that…
The NFT would be a bit like the certificate saying you own it, even though it’s shared over the internet, and the original owner still has the raw file of whatever they sent you. What’s mind-boggling is that anyone who comes across your one-of-a-kind NFT can simply right-click their mouse and save it to their computer.
That easy…
Still, sounds crazy to you? Wait till you find out what’s actually being traded as NFTs. You’re not going to believe this!
Let me make this even more simple for you.
Have you ever heard of Logan Paul? If you’ve ever been on YouTube, you must have. Logan Paul is an American YouTuber with more than 23 million subscribers.
Believe it or not, people bought 15-second clips of his YouTube videos for up to $20,000. Yes, you heard me right. People bought clips of a video that is already up on YouTube, where they could watch it for free, for more money than what my car is worth. The video is of him opening Pokémon card packs.
And that’s not the worst of it.
Someone bought a Gucci Ghost picture for $3,600, and they’re now asking $16,300 for it. That’s a 353% price increase for a picture that I can easily get by right-clicking my mouse and selecting “save as”… absolutely free!
Unlike the fine art market, where you can buy an original Monet or Rembrandt for millions of dollars, people are spending thousands of dollars, could be even millions, on Beanie Babies, and trading cards. Someone even spent over $46,000 on a picture of a pet rock.
What’s worse…
All this nonsense uses 10 times the amount of electricity that normal cryptocurrencies use. One NFT transaction uses on average 35 kilowatts. If you like analogies, this is roughly enough electricity to power a fridge for an entire month. Selling two NFTs generates about the same amount of greenhouse gases as a U.S. family home generates in 21 years. Go figure…
Believe it or not, NFTs are causing a climate crisis for a stupid art that people pretend, just pretend, that they own. And no one is doing a damn thing about it! And I haven’t even touched yet on the ethical issues of encouraging those under-18 to enter the NFT market, one that is rife with scams, money laundering, rip-offs, and cons.
While researching the content of this article, I came across cases where artists promised to deliver NFT projects, only to disappear into thin air after receiving payment, never to be heard from them again. In one of the cases, an artist sent random emojis from their phone instead of the real NFT after receiving the equivalent of $138,000 in cryptocurrency.
While only a few people are able to understand what NFTs actually are, that hasn’t stopped the NFT market from soaring in 2021.
I’m going to share with you some statistics that will blow your brain.
According to DappRadar, which tracks NFT sales, the global market value of NFTs hit $23 billion as of December 2021, compared to just $100 million in 2020.
How did this happen? Most of the surge was the result of big businesses entering the fray.
Coca-Cola raised more than $575,000 from selling items such as a customized jacket to be worn in the metaverse world of Decentraland. Hollywood, sports celebrities, and big brands like Gucci, Nike, and Adidas also made their dent in the space. Football fans have been targeted with NFT marketing backed by former big players, such as England’s John Terry and Wayne Rooney.
The most valuable NFT sale in 2021 was The First 5000 Days, a digital collage by Beeple, the name used by the American digital artist Mike Winkelmann. It was auctioned for $69.3 million in March 2021, making it one of the most valuable pieces of art ever sold by a living artist. Another Beeple NFT, called Human One, sold for $29 million.
Then you have the Bored Ape Yacht Club. It is a collection of 10,000 NFTs represented as cartoon primates that are used as profile photos on the social media accounts of their owners. They raised $26.2 million, mainly by celebrity owners, including talkshow host Jimmy Fallon, and rapper Post Malone. NFTs also arrived at famous traditional art auction houses like Christie’s and Sotheby’s.
While NFTs aren’t at the same level as cryptocurrencies, even meme coins like Dogecoin or Shiba Inu, they’re big enough to be more valuable than many publicly traded companies. NFTs are now worth more than Nissan and Domino’s Pizza combined, according to Yahoo Finance’s December 18, 2021, online issue.
But how did a simple craze turn digital images into a $23 billion online business? And more importantly, will this “digital gold rush” be able to sustain itself in the future? That’s the multi-multi-million-dollar question, which stopped Matrix star Keanu Reeves from keeping a straight face when told about NFTs.
Think how wonderful this is….
In exchange for a cryptocurrency token, you can now own a digital watercolor painting of Melania Trump’s eyes. Even the former first lady of the United States launched a venture this week selling her own NFTs on her website in exchange for Solana tokens, currently valued at around $180 each.
An irony-free statement from her office said it is “a breathtaking watercolor art by Marc-Antoine Coulon, and embodies Mrs. Trump’s cobalt blue eyes, providing the collector with an amulet to inspire.” By doing that, she’s now joined a growing list of celebrities offering lucrative digital memorabilia, including Argentinian footballer Lionel Messi, Jamaican athlete Usain Bolt, singer Justin Bieber, and K-pop group BTS.
Her announcement was met not only with sarcasm but also with doubt. Richard Hine, a novelist, commented on Twitter: “I’m not saying most NFTs are scams operated by grifters and money launderers. I’m just saying Melania Trump is launching an NFT.”
NFTs are being used regularly for money laundering. Reportedly, those who use them to clean their dirty money, do that by creating an anonymous NFT, listing it for sale on the blockchain, buying it from themselves with their anonymous, illicit money, and then turning that money into legitimate and usable currency. And then the dirty money, all in crypto, of course, would keep transferring through anonymous wallets before being converted back into actual money.
The world of NFTs is a dirty world, a world where one can gain everything, or one can lose everything. This is one reason why many remain skeptical about it. It has grown too big, too fast, with NFT trading volumes growing 38,000% year-over-year.
No…
NFTs are not a new artistic medium in the way that oil painting, printmaking, photography, or video art were. Even digital art, which is just art made on a computer, pre-existed NFTs by decades.
NFTs are financial instruments. They make it easier to sell digital files by creating scarcity. But you can also do other things with NFTs. For instance, you can divide an NFT into fractions and sell it as shares. If it goes up in value, so will the shares. The companies already doing this promote it as a way to democratize art ownership and investment.
In a complex, incentivized sale that points to the gamification of the NFT art market, more than 28,000 buyers spent a total of $91.8 million to acquire 266,445 “shares” of a digital work called “The Merge” in early December 2021.
NFTs have already transformed the art world. Whether they will continue to do so or not, that’s another issue. But for now, the boom continues.
Unless…
NFT buyers are like investors, or so they think. The better the project does, the better they do. They bet their money on the organizers’ long-term plans for growth. But not all of them succeed, especially if they were scammed, the KGB style.
According to the famous magazine The Rolling Stone December 17 issue, a huge scam left fans who bought Tekashi six nine-backed NFTs totally pissed.
The six Trollz holders, who spoke with Rolling Stone, say these developers may have just been orchestrating a cash grab — or what’s called a “rug pull” in the NFT world — all along. By the way, for those not familiar with the term, a “rug pull” is a “malicious maneuver in the cryptocurrency industry where crypto developers abandon a project and run away with investors’ funds,” according to CoinMarketCap.
All of them feel confused and full of distrust, especially since the moderators have disappeared, says Rolling Stone. Scammers are making promises they’re not delivering on, and they’re doing it like clockwork, the magazine was told. Every month, some celebrity co-signs something, and people are getting screwed — and there are no legal repercussions for any of this. That’s the bigger issue at play.
Back in October, mere days ahead of the launch, 6ix9ine himself promoted the Trollz NFT collection in an Instagram post that has since been taken down. The project, which was immediately met with questions about its legitimacy, was billed at the time as an effort that would see a total of $100,000 going to various charity groups. Token owners, meanwhile, would receive royalties.
One fan, a 26-year-old crypto investor whom the Rolling Stone identified only as Jacob, said the project “turned out to be a huge scam,” one in which he invested an estimated $40,000. It’s believed that 100,000 others may have also been scammed.
In the November 21 issue of Digital Music News, computer scientist Antsstyle says “NFTs are only valuable as tools for money laundering, tax evasion, and greater fool investment fraud. There is zero actual value to NFTs. Their sole purpose is to create artificial scarcity of artwork to supposedly increase its value.” That assessment is the core argument as to whether NFTs are a scam or not.
On Dec. 1, 2021, the New York Times cited the latest example of art market disruption — a prominent former auction executive teamed up with cryptocurrency experts in May to purchase for $12.9 million and now plans to sell off 10,000 pieces of it as NFTs.
The executive, whom the newspaper identified as Loic Gouzer, remember him, the guy who upended the traditional auction format while he was at Christie’s — most notably orchestrating the sale of a $450.3 million Leonardo da Vinci painting in a contemporary art auction in 2017. That same guy has now helped found the company Particle, a platform that merges art and technology with the goal of reaching a broader pool of potential buyers.
Longtime collectors remain skeptical of NFTs and art experts say the Particle enterprise is just the latest iteration of a virtual art world that has yet to be proven. The Banksy painting “Love Is in the Air,” which features the image of a bomb-thrower hurling a bouquet of flowers, was divided into a 100 x 100 grid, resulting in 10,000 unique squares, or Particles, which will be sold as NFTs for about $1,500 each.
On Dec 3, 2021, a British Security Think Tank Warned NFTs Could Bolster Money Laundering Schemes. The Royal United Services Institute’s report said: “This technology can raise alarm bells from a money laundering and financial crime perspective.” The report called “NFTs: A New Frontier for Money Laundering?”
The New York Times also explained that there is an urgent need to investigate the secret art market. “Secrecy has long been part of the art market’s mystique,” the report said, “and an art heist is possible within the NFT realm.”
NFT art theft is becoming a huge problem.
Many comic artists have become so sick and tired of having their work stolen that they decided to shut down their galleries on online art communities. It’s a huge problem that isn’t talked about much: many NFTs circulating online are the result of copyright theft.
Even late comic book legend Stan Lee, remember him, he passed away back in 2018,
has gotten sucked into the NFT craze — and from beyond the grave. His official Twitter account was being used to sell an NFT in the form of an image of the superhero Chakra The Invincible last week.
In short…
The NFT marketplace is still riddled with scams, not to mention money laundering, that leaves thousands of crypto enthusiasts out in the cold.
Despite the risks, the tokens are more popular than ever before, with the likes of Nike and Melania Trump jumping on the bandwagon. And that could bode badly for artists trying to make a living from their art.
