Over $100M Stolen in NFT Scams as Tornado Cash’s Role Revealed

Tornado Cash was the primary tool used to launder $100 million stolen in NFT scams between July 2021 and July 2022 according to a new report by Elliptic.
Image source: Medium/Crypto Unchained

Quick take:

  • Over $100 million was stolen in NFT scams between July 2021 and July 2022.
  • Fraudsters used crypto mixing platform Tornado Cash to launder 52% of NFT scams.
  • Criminals stole an average of $300,000 per scam according to the report published by Elliptic.

Non-fungible token (NFT) enthusiasts lost more than $100 million in NFT scams between July 2021 and July 2022 according to a report by UK-based blockchain analytics and financial crime compliance firm Elliptic.

According to the report, criminals made on average $300,000 per scam based on reported cases.

The report also shows that US-sanctioned crypto mixer Tornanado cash processed over $137 million worth of crypto assets, including 52% of the reported NFT scam money, before the US Office of Foreign Assets Control (OFAC) intervened with a ban in August.

CryptoPunk #4324 sold by scammers on November 13, 2021, for a whopping $490,000 was the most valuable NFT stolen as per the report. 

“Meanwhile, the largest single heist from an individual victim resulted in the loss of 16 blue-chip NFTs worth $2.1 million on 28 December 2021,” Elliptic wrote in the analysis.

“Emphasising the persisting problem of scams, assets #9650 and #5759 in the CloneX collection have been stolen twice in the space of three months – in two unrelated scam incidents – having been worth around $50,000 on both occasions,” the report points out.

NFT scams often target unsuspecting traders through phishing links placed on community platforms, including social media channels like Twitter, Discord, and Instagram.

For instance, Yuga Labs’ BAYC Instagram account was hacked earlier this year resulting in the loss of $3 million worth of Bored Ape NFTs.

There are also scams specifically unique to NFTs. In May, NFTgators covered one of the most NFT scam exposures after one trader unveiled how a scammer used smart contracts and airdrops to dupe unsuspecting traders.

This type of scam uses a trojan horse smart contract to lay a trap for traders. Once a trader accepts the contract, their wallets are immediately drained.

Scammers use mixing platforms like Tornado Cash to convert stolen tokens into other cryptocurrencies before the victims realize what has transpired. “Its prolific use by threat actors engaging with NFTs further emphasises the need for effective sanctions screening by NFT platforms,” Elliptic wrote.

Web3 companies have launched tools and features to limit fraudulent activity in the burgeoning industry. In May, Chainalysis said it was expanding its fraud detection service to include NFTs and other crypto assets after raising $170 million.

Animoca Brands, The Sandbox, Decentraland, Dapper Labs and others also teamed up to launch the Open Metaverse Alliance, which will among working on other goals, take action to reduce NFT fraud in the industry.

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