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February 14, 2022

Three NFTs Seized by UK Authorities in a $1.89M Fraud Case

Her Majesty’s Revenue and Customs (HMRC) has seized three non-fungible tokens (NFTs) in what appears to be a first for the growing asset class. The seizures are part of an investigation into an alleged tax scam involving 250 phony firms that were used to hide taxes totaling £1.4 million (about $1.89 million).

According to the BBC, HMRC has arrested three suspects in connection with the alleged plot, claiming that they used “advanced ways” to deceive the tax office. To deceive HMRC, the suspects generated phony identity documents, residences, mobile phone numbers, and invoices.

The agency was able to track down the alleged tax evaders and seize cryptocurrencies worth £5,000 (about $6765) as well as three digital work NFTs.

HMRC took advantage of the situation to issue a strong warning to crypto investors who are attempting to conceal taxable income through NFTs. Nick Sharp, HMRC’s deputy director for economic crime, is said to have said that the seizure should serve as a caution to anyone who believes they can hide money from HMRC using crypto assets. He went on to say that they’re always adjusting to new technology to stay on top of how crooks and tax evaders hide their riches.

The recent seizure of NFTs in the United Kingdom may be the first time the new asset class has been seized by a regulatory agency in any jurisdiction. This could indicate that NFTs are rapidly transitioning from “JPEGs” on the internet to assets worthy of regulatory monitoring.

As seen by the recent $3.6 billion bitcoin seizure by US authorities in connection with the Bitfinex breach, regulators have become accustomed to seizing digital assets from offenders. Industry participants, on the other hand, will be watching to see if this trend, as well as other regulatory boundaries, will be extended to NFTs.

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Recent incidents of NFT copyright issues and a tax evasion case in the United Kingdom may set the tone for tighter regulatory control of the emerging crypto sector.