Do NFT's sound too good to be true?

Stories of non-fungible tokens, NFTs, being sold for millions of dollars have made the news over the past year. Our blog from September 2021, Are NFT’s an investment?, looked at some of the craziness of the NFT marketplace. Just one example is when a token of ownership for a free clipart image of a rock sold for over 1,300,000. It seems crazy to us at Prato Capital.

The sale of NFTs have only gained momentum since our last article. The largest NFT marketplace, OpenSea, has seen its trading volume increase to $1.9 billion in just the first 10 days of 2022. But as is often the case with new and emerging technologies, there is a dark side to the craziness of the NFT marketplace.

Reuters reported on February 12, 2022, OpenSea said last month “more than 80% of the NFTs minted for free on its platform were plagiarized works, fake collections and spam”. Another NFT marketplace, Cent, recently stopped most NFT sales due to “plagiarism, fakes and scams.” Cameron Hejazi, the CEO of Cent, called these issues “rampant” and that most NFT sales were just “money chasing money.” The bad news coming out of the NFT marketplaces continues with news that Her Majesty’s Revenue and Customs in the United Kingdom have seized three NFTs worth than $1.9 million due to suspected tax fraud.

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