Quick take:
- Her Majesty’s Revenue and Customs is the first UK law enforcement to seize NFTs.
- The three NFTs have not been valued.
- The NFT seizure serves as a warning to those who intend to evade tax using crypto assets.
Her Majesty’s Revenue and Custom (HMRC) has seized three NFTs as part of suspected tax fraud. The UK authorities have also arrested three people related to the case.
According to BBC News, HMRC said it was the first UK law enforcement to seize NFTs. The law enforcement agency also said that the suspects in the fraud case allegedly tried to hide their identities using “sophisticated methods” including false and stolen identities, false addresses, pre-paid unregistered SIM cards, Virtual Private Networks (VPN), and fake companies issuing false invoices.
HMRC had obtained a court order to seize the three NFTs, which have not been valued, along with crypto assets worth £5,000 ($6,757). These assets are part of a £1.4 million ($1.89 million) fraud case and investigation into the case is still ongoing.
Speaking to BBC News, Nick Sharp, deputy director of economic crime, said the first seizure of an NFT “serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC”.
“We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets.”
While tax concerns in the NFT space have been a known issue since NFTs soared to new heights last year, government agencies have begun cracking down on financial crimes in the space. Last year, the IRS seized $3.5 billion worth of crypto tied to financial crimes.
As tax season begins, government agencies in the UK and the US have issued warnings about rampant fraud in cryptocurrencies and NFTs. In a report published on Feb 2, blockchain data platform Chainalysis identified money laundering as a visible concern in NFTs.
On Feb 7, the US Treasury published a study, warning that NFTs may present new risks of money laundering in the high-value art market. To mitigate these risks, the agency urges “institutional art market participants, such as certain auction houses and galleries, maintain procedures for conducting due diligence on potential buyers and sellers.”
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