UK Authorities Seize Three NFTs in Suspected $1.89M Fraud Case

The United Kingdom tax authority, Her Majesty’s Revenue and Customs (HMRC), has seized three non-fungible tokens (NFTs) in an apparent first involving the emerging asset class. The seizures are part of a probe into an alleged tax fraud involving 250 fake companies used to conceal taxes worth £1.4m (appr. $1.89 million).

According to a BBC report, HMRC has arrested three suspects behind the alleged scheme, revealing they had employed “sophisticated methods” to defraud the tax authority. For instance, the suspects created false identity documents, addresses, mobile phone numbers, and invoices to mislead HMRC into believing they were doing legitimate business.

However, the agency was able to hunt down the alleged tax defrauders, seizing cryptocurrencies worth £5,000 (appr. $6765) and three digital work NFTs.

HMRC seized the opportunity to issue a stern warning to crypto investors trying to use NFTs as a means to hide taxable income. HMRC’s deputy director for economic crime, Nick Sharp, reportedly noted the seizure “serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC.” He added,

“We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets.”

Will NFTs come under more regulatory scrutiny?

The latest seizure of NFTs in the UK arguably marks the first time that a regulatory body in any jurisdiction has confiscated the new asset type. This would perhaps indicate that NFTs are quickly evolving from mere internet “JPEGs” to assets worthy of regulatory oversight.

It has become customary for regulators to seize crypto assets from offenders, as seen in the recent $3.6 billion bitcoin seizure by U.S. authorities in connection to the Bitfinex hack. However, industry participants will likely be eager to see if this trend, as well as other regulatory borders, will be extended to NFTs.

Recent cases of NFT copyright issues and the UK’s tax evasion case might set the tone for increased regulatory oversight of the emerging crypto sector.