This called for a growth of users demanding policies to police the NFT market and to bring an agency to do so. Of course, this does defeat the purpose of Decentralization, which has acted as a double-edged sword and led to the current state of matters for the NFT market.
The Rise of NFT:
The NFT or non-fungible tokens were supposed to be the chosen ones, to bring forth the semblance of a guarantee of uniqueness.
The total NFT market, as tracked by Crypto Slam (1), has grown exponentially from a little more than US$54 million in monthly sales in January 2021 to US$3 billion in May 2022.
Furthermore, it is said to grow by US$140 million by 2026, as forecasted by TechNavio, a unit of Infiniti Research Pvt Ltd. About 43% percent of its growth came from the Asia Pacific region, with the main contenders being Singapore, China, and the Philippines.
Of course, such a rise in interest in the industry has also led to the emergence of some bad actors.
Attack of the Scammers:
In early June, the US department of justice charged a former NFT employee of the NFT market – Open Sea, with wire fraud and money laundering for allegedly using insider information to trade NFTs.
Nate Chastain had allegedly used insider knowledge as to which NFTs will be placed on the platform home page to trade NFTs at 2 to 5 times their original value. He also used multiple wallets to hide his actions.
In March, Ethan Vinh Nguyen and Andre Llacuna, two 20-year-old creators behind an alleged US$1 million NFT scam, were charged with conspiracy to commit wire fraud and money laundering. [2]
They were caught siphoning off funds from their investors after their investors had poured money into their Frosties NFT collection. These two were caught trying to repeat their scam with a second set of NFTs titled ‘’Embers’’.
A New Hope:
In a recent interview with Forcast, Yehuda Petscher, a strategist at an NFT aggregator, CryptoSlam told them that
“I was always hoping that the space would be able to police itself and we wouldn’t need lawyers involved in regulations and all of those things, but we really do. it is time to clean up this mess”
A key challenge for courts and regulators is enforcement in an industry that is decentralized by nature. To combat this, some blockchain enthusiasts believe that the only governance in such a system should be that of the software ‘Code’ or the philosophy that ‘Code is the law.
Some countries have started passing laws to provide NFTs with the same rights as that “Property,” which allows the courts to try the NFT scammers, though this defeats the purpose of creating a decentralized system that was promised by the NFT market.
In the end, due to the rising cases of fraud in the NFT market, the law's purview might need to be bought back.
