• B

    Basil S.

    Amidst The Gold Rush: How NFT-Scammers Cash In On Stolen Art

    What are u doing with this art?

    Stealing other people’s art as a means of reaping financial gain dates back more than two thousand years and is considered to be one of the earliest forms of fraud known to mankind. Lately, fraudsters from all walks of life seem to have found themselves a new market niche to capitalize on in form of NFTs: as sales of digital art turned into non-fungible tokens keep breaking new records, a number of artists have taken it to Twitter to claim that their works have been stolen by impostors and sold as NFTs on various marketplaces without their permission. 

    Identity Theft

    One of the more prominent cases of such NFT-fraud was reported by artist Derek Laufman, who was impersonated by scammers on the NFT marketplace Rarible in the middle of March. A fan of Laufman’s work approached artist on Twitter to ask whether he had been in fact selling NFTs on the platform, to which Laufman responded: 

    It turned out that a scammer had verified on the platform as Derek looking to sell NFTs of his work under his name. Rarible took the artist’s account down after Laufman made clear that this was an impersonation, although by that time one of the artist’s fans had already bought an NFT from scammer under the fake profile. 

    Laufman’s case is by far not the only example of artists getting ripped off by NFT-scammers: according to The Verge, a plethora of artists and collectors have fallen victim to the same fraudulent scheme on NFT-platforms such as Rarible, OpenSea, and Marble Cards. Given that none of these platforms require users to verify their ownership of an art piece prior to minting it as an NFT, the task of impersonating artists and selling works without their consent becomes that much easier.

    Breaking & Entering

    Minting works of digital creators without their consent on platforms like Rarible seems to be the most common way of cashing in on the NFT frenzy among fraudsters, but it isn’t the only one: over the course of this month, a number of Nifty Gateway users have reported that their accounts on the website had been hacked, and their NFTs — stolen.

    Due to the fact that Nifty Gateway allows purchasing NFTs with credit card instead of crypto, some collectors were able to reclaim their money back by reporting fraudulent charges to credit card companies. The stolen NFTs that were purchased with crypto, however, have already been resold by hackers and will most likely never return to their owners since it’s impossible to reverse a transaction on blockchain.  

     It should be pointed out that Nifty Gateway encourages its users to use two-factor authentication to protect accounts from fraud — and according to the website’s spokesperson, none of the accounts that had been taken over by hackers had 2FA enabled. As for the moment, the site’s users have already lost over $150,000 worth of NFTs to hackers. 

     Burden Of Guilt

    The NFT theft cases on Nifty Gateway teach users a valuable lesson: if you’re willing to purchase a valuable piece of tokenized art on the web, it is probably a good idea to make sure that your account is properly protected from fraud. The recent news about this and similar incidents serve as a nice reminder on the importance of online security in 2021, but they will hardly convince anyone to give up the idea of collecting NFTs. After all, had the victims enabled the two-factor authentication just as the website advised them to, their accounts probably wouldn’t have been hacked in the first place. 

     The whole NFT-scamming thing, however, is a completely different issue. For one, it shows that basically anyone can take someone else’s work, mint it as an NFT, and put it on sale as their own without the artist’s knowing. In a way, by revealing the extent to which this market is vulnerable to fraud, scams like these devalue the entire idea of collecting NFTs. If anybody on the web can mint a digital representation of a certain JPEG image and sell it for an exorbitant sum of money, what does even make purchasing the same tokenized image directly from the artist so special?

     At the end of the day, fixing the issue with scams is completely up to NFT-platforms. The sole reason NFT-scamming schemes work so well is that on most of these websites, users don’t need to verify their ownership of a given piece of art before putting it on blockchain as a token. To put a stop to mass copyright infringement on their websites, platforms like Rarible and OpenSea simply need to introduce a mechanism that would require users to verify their identity (or their ownership of copyright) prior to putting a piece of art on auction as an NFT. Sadly for NFT-collectors and artists alike, protecting them from scams does not seem to represent much of a concern for these platforms.

    The content of this article is for informational purposes only and should not be construed as investment advice. We ask you to do your research.