HM Revenue and Customs, the UK’s tax authority, has seized NFTs for the first time as part of a tax fraud investigation. As part of a probe into suspected VAT fraud involving 250 allegedly fake companies, it also grabbed three NFTs. This makes it the first raid by UK law enforcement to seize NFTs.
In this case the suspects are using some fairly sophisticated measures to avoid detection, including false identities, fake addresses, and pre-paid mobile phones. The three people arrested were also using VPNs and false invoices while seeking to screen their activities using false businesses. HMRC said it was seeing criminals increasingly using crypto assets and NFTs in an effort to hide their activities. The case amply demonstrates the level of sophistication being used by criminals operating in the cryptocurrency space.
Because of the unregulated nature of these markets, it also serves as an important lesson for investors, who must take full responsibility for protecting their assets. Below are some tips from Adam Morris, co-founder of NFT Club.
“Investors need to always be vigilant, as people are getting pretty smart with the sorts of scams they come up with. And with the UK tax authority reporting the first NFT fraud case in the country, British investors need to be aware of how to look out for scams and how to avoid falling for them,” Morris said.
Scammers look for individuals who are interested in NFTs or new to the market. They usually join Discord servers and mass-message their members, DM people on Twitter, Telegram, Reddit, or make connections on apps like Bumble Bizz.
If it sounds too good to be true – it probably is
When approaching potential investors, scammers will try to make their scam sound like the best available marketing opportunity. People who have been investing in NFTs for a while will know how to ignore these messages, however, many of the new-comers are more likely to not recognise these types of scams.
“Among the techniques used by scammers to trick buyers is the one of making copy collections in the attempt of confusing investors into buying the wrong asset,” Morris explained. “‘Phishing’ is also quite common: this involves fake portals asking for user login details and credit card information, like, for example, in the Metamask phishing scam. The best way to verify the authenticity of the site you’re on is to use websites like ScamAdviser and Trend Micro Check. In addition, always make sure to check if the contact address of the NFT matches the one that appears on the website where the NFT is listed.”
When looking into investing in NFTs, remember to never send your assets to anyone directly and to use a marketplace instead. In addition, you should use a hardware wallet, not a web-wallet, in order to avoid all risks – if your browser is compromised, a skilled hacker could easily gain access to your assets and take them.
When browsing for the top collections on websites like OpenSea, you should look for the blue ‘verified’ check to be sure that the item selected in a true NFT with value. Most importantly, never share your credit card information and always make sure you’re on a legitimate website.
