NFT traders made nearly $8.9 million USD in 2021 using an illegal activity called “wash trading” to artificially boost the value of their assets.
A new report by blockchain data platform Chainalysis revealed that some NFT traders are “making a killing” with wash trading, where the seller is on both sides of the NFT trade, leading to misleading inflation in the asset’s value. According to the report, wash trading is usually of concern with cryptocurrency exchanges, where trade volumes are faked to appear larger.
“In the case of NFT wash trading, the goal would be to make one’s NFT appear more valuable than it really is by ‘selling it’ to a new wallet the original owner also controls,” Chainalysis said.
The platform tracked NFT washing by analyzing sales of NFTs to addressed that were funded in some way by the selling address. It said that some NFT sellers have conducted hundreds of wash trades, noting that one of the most prolific NFT wash traders made 830 sales to addresses that were self-financed.
“Using blockchain analysis, we identified 262 users who have sold an NFT to a self-financed address more than 25 times,” the report said. “While we can’t be 100% sure that all instances of NFT sales to self-financed wallets are intended for wash trading, the 25-transaction threshold gives us a higher degree of confidence that these users are habitual wash traders.”
While not every wash trader is successful because of gas fees associated with transactions, Chainalysis identified 110 profitable wash traders who have collectively made nearly $8.9 million USD — likely from victims who were unaware that the NFT they purchased had been artificially inflated in value.
The report was a preview of Chainalysis’ 2022 Crypto Crime Report, set to release this month. The platform also observed that crypto scammers stole a record $14 billion USD in 2021.
In other news, crypto exchange FTX has been valued at $32 billion USD after its latest funding round.
wazup.