NFT wash trading remains mostly unprofitable, Chainalysis report says

A recent report by blockchain data and analysis firm Chainalysis has identified a rising case of illicit activities via non-fungible tokens, or NFTs. The latest boom in the NFT sector has spawned a rise in wash trading and money laundering, the two most popular NFT-related crimes picked out by the firm.

Wash Trading is a practice of feeding misleading information related to stocks of a company by selling and buying the same financial instruments. With NFTs, wash traders “make one’s NFT appear more valuable than it really is by “selling it” to a new wallet the original owner also controls,” according to Chainalysis.

Per the content findings of the report, criminals have made nearly $8.9 million from wash trading of NFTs. However, the profits were made by only a few addresses, with more than half of the wash traders losing money as a result of gas fees and marginal interest from real buyers.

The research also pointed out a significant jump in NFT-based money laundering last year. It has tracked NFTs worth $2.4 million sent from wallet addresses associated with illicit activity.

“All of this activity represents a drop in the bucket compared to the $8.6 billion worth of cryptocurrency-based money laundering we tracked in all of 2021,” the report read. It added:

“Nevertheless, money laundering, and in particular transfers from sanctioned cryptocurrency businesses, represents a large risk to building trust in NFTs, and should be monitored more closely by marketplaces, regulators, and law enforcement.”

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