NFTs are Highly Susceptible to Fraud and Scams: US Treasury Report

cryptonews.com:

The US Treasury, on Wednesday, released it first risk-assessment report, exploring the vulnerabilities associated with non-fungible tokens (NFTs). The report stressed that these asset classes are “highly susceptible to use in fraud and scams,” most of which are traditional schemes.

The findings highlighted several potential risks and security concerns and challenges involved in NFTs. These digital collectibles are used by criminals “to launder proceeds from predicate crimes,” the 29-page report read.

However, these tokens are seldom used for proliferation financing or terrorist financing, it added. “It also found little evidence of the misuse of NFTs by terrorists or proliferators, in contrast to fraudsters, to date,” a statement from the department, noted.

The report also explored case studies such as NFT’s use in evading sanctions and generate revenue for military spending by North Korean bad actors.

“In addition to stealing funds from virtual asset firms and projects, DPRK-linked actors have engaged in separate activities within the digital asset ecosystem that indicate that the group may have the expertise and access to increasingly abuse NFTs to generate revenue.”

Some of the NFT scams which have come to the fore include phishing frauds, counterfeit NFTs, rug-pulls, among others. In 2022, CryptoBatz fell victim to phishing scam, few days after the launch.

Another notable similar attack occurred in April 2022 on BAYC’s official Instagram page, where scammers stole almost $3M worth of BAYC NFTs.

Last year, OpenSea marketplace was reportedly attacked by scammers, stealing hundreds of Ethereum (ETH). Data analytics company PeckShield revealed that the exploit occurred due to “a front-end issue.” As a result, perpetrators