NFTs: be wary of fraud

Non-Fungible Tokens (NFTs) are no stranger to our Reading Room – this unique data formation is stored on blockchain or a digital ledger and is then sold on online platforms. This enables the traceability of ownership on works of art, music and even memes. Purchasing NFTs usually does not provide the buyer with the copyright to the asset, and it is important to note that NFTs may be easily open to fraud.

Common fraud types include replica NFT digital stores, which use similar domain names to those of real NFT online stores, copying their colour schemes, logos, and design prints. Therefore, the NFT being sold does not exist and it is important to look out for the small clues that may give an illegitimate website away. Further, you must be cautious of any counterfeits which impersonate original artist works, as well as social media scammers, which direct buyers to purchasing counterfeit NFTs. The final common type of fraud consists of fraudsters inflating prices of NFTs through false information and advertisement about the value of the work, placing them on the market and leaving the investor to deal with the damage once the price crashes.

There are some remedies available to recover losses in light of the above. Although it can be near enough impossible to trace the identity of a fraudster in a transaction, it is possible to trace cryptocurrencies that are used to pay for the NFTs, enabling remedies such as freezing and proprietary injunctions to preserve the assets and assist in identifying the fraudster.

If you have any queries regarding the above, or would require our assistance with an alternative matter, please do not hesitate to get in touch with our expert team of solicitors at Lawdit today.

Tel: 023 8023 5979


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