HM Revenue and Customs (HMRC) has seized three Non-Fungible Tokens (NFT) as part of a probe into a suspected VAT fraud involving 250 alleged fake companies.
The UK tax authority said 3 people had been arrested on suspicion of attempting to defraud it of £1.4m.
HMRC said it was the first UK law enforcement agency to seize an NFT.
NFTs are assets in the digital world that can be bought and sold, but which have no tangible form of their own.
The digital tokens, which emerged in 2014, can be thought of as certificates of ownership for virtual or physical assets.
NFTs have a unique digital signature so they can be bought and sold using traditional currency or crypto currency, such as Bitcoin.
The ability for artists to collect returns on resale value automatically is part of NFTs’ draw for artists.
While NFTs have had a positive impact on many artists, there isn’t enough data available yet to see if NFTs are benefiting the many or just a select few.
Preventing theft is an ongoing challenge: artists who have held back on creating NFTs have often seen their work minted by unknown parties, and only a few NFT marketplaces verify a piece’s creator before allowing it to sell. Artists who have complained about this issue online have been told to create NFTs of their work just to stop theft, an imperfect solution that has artists feeling as if they’re being forced to create NFTs. Additionally, many artists have refused to create NFTs on moral grounds.
As cryptocurrencies have exploded in price, high profile seizures by authorities have become increasingly common.
HMRC found out three suspects that apparently used everything from fake addresses, prepaid phones, VPNs, and stolen identities to hide their activities from HMRC. The UK tax authority has not taken control of the NFTs, but that it is using a court order to prevent them from being sold.