Chainalysis report: There are a lot of wash trading and money laundering activities in the NFT market

This article comes fromDecrypt, original author: Scott Chipolina

Odaily Translator | Nian Yin Si Tang

This article comes from

, original author: Scott ChipolinaOdaily Translator | Nian Yin Si Tang。

Blockchain analysis platform Chainalysis has found "significant" evidence of wash trading and money laundering in the emerging NFT market.

stated in a report

Fundamentally, wash trading is a form of market manipulation whereby an investor simultaneously buys and sells the same asset, creating false and misleading activity in the market.

Likewise, an NFT holder can "sell" their NFT to another wallet they control, causing the NFT to "appreciate" in value.

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NFTs and wash trading

Chainalysis tracks wash transactions by analyzing NFT sales to "self-financed" addresses, in other words, transactions that are funded by the selling address or the address that originally funded the selling address.

According to this methodology, the report ended up revealing hundreds of thousands of wash trades. One of the users — the most prolific wash trader identified by Chainalysis — was found to have completed 830 trades sent to self-funding addresses.

“We found 262 users who sold NFTs more than 25 times to a self-funded address,” Chainalysis said.

Chainalysis believes that these funds "likely came from sales to unsuspecting buyers who simply believed that the NFTs they purchased had been increasing in value and circulating among different collectors."

While the blockchain analytics firm admits that it cannot be "100% sure" that all NFT sales to self-funded wallets are wash traded, "the 25 transaction threshold makes us very confident that these users are habitual wash trades." By."

What's more, Chainalysis' data only records transactions for ethereum and wrapped ethereum (ERC-20 tokens that reflect the price of ethereum). “There may be wash trading activity that we haven’t considered,” Chainalysis added.

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money laundering problem

Chainalysis reported that funds sent to the market via illicit addresses “climbed significantly” in the third quarter of 2021 and grew again to nearly $1.4 million in the fourth quarter of 2021.

Chainalysis found that this was due to transfers from cryptocurrency exchange Chatex, which is on the U.S. Office of Foreign Assets Control’s list of Specially Designated Nationals.

That’s what Chainalysis found when it tracked $8.6 billion worth of cryptocurrency-based money laundering in 2021.

“Money laundering, especially transfers from sanctioned cryptocurrency businesses, poses a significant risk to building trust in NFTs and should be monitored more closely by the market, regulators, and law enforcement,” Chainalysis noted.

secondary titleArt and Illegal ActivitiesIllegal activity — especially money laundering — has long plagued the traditional art world, and some experts have long warned that NFTs could exacerbate the problem.

Gabriel Hidalgo, General Manager, K2 Integrity

told Decrypt