In the year to July, thieves stole over $100 million (S$139 million) in non-fungible tokens, according to blockchain research firm Elliptic, as the fast-emerging digital asset became a new front in crypto’s hacking problem.
NFTs are blockchain assets that represent digital files like images, videos, or text.
In 2021, the market soared as crypto-rich speculators poured billions of dollars into the assets, hoping to profit as prices rose. However, NFT prices and sales volumes have plummeted since cryptocurrency prices crashed in May and June this year.
Scams continue to plague the NFT market, even as it declines, with July seeing the highest number of NFTs reported stolen on record, according to a report from London-based Elliptic. In addition, according to the report, security breaches through social media have increased, accounting for 23% of NFT thefts in 2022.
According to Elliptic, thieves received an average of $300,000 per scam.
Because not all crimes are publicly reported, so the accurate scale of NFT thefts is likely to be even higher.
Hacks and scams have long plagued the cryptocurrency industry, and regulators worldwide are growing concerned about using crypto assets in cybercrime.
Elliptic estimates that the amount of money laundering in NFT-based platforms is only $8 million. However, according to Elliptic, nearly $329 million in funds in the NFT market came from services such as so-called cryptocurrency mixers, which are designed to conceal the origin of the funds.
Before it was sanctioned by the US this month, one such mixer, Tornado Cash, was used to launder just over half of the proceeds of NFT scams, according to Elliptic.
“Sanctioned entities and state-sponsored exploits pose a growing threat to NFT-based services,” Elliptic said, citing a $540 million theft linked to North Korea’s Lazarus Group in April.