(JustPatriots.com)- An IRS special agent warned last week that as they grow in popularity, NFTs (non-fungible tokens) and cryptocurrencies are highly susceptible to fraud and manipulation.
While speaking at a virtual event for the USC Gould School of Law, Ryan Corner, from the IRS Criminal Investigation’s LA field office, said NFTs and cryptocurrencies have become an area of growing concern for regulators and tax collectors because they are seeing “mountains of fraud.”
Due to their rising popularity, regulators are struggling to police how to prevent NFT tokens from being used for criminal activity like fraud, money laundering, tax evasion, and market manipulation.
An NFT is a digital asset that uses blockchain technology to record the ownership of digital objects like artwork, music, and even memes. As they are one-of-a-kind and generally purchased using the cryptocurrency of the Ethereum blockchain, NFTs are non-fungible.
Celebrities have been launching their own NFT collections, including movie director Quentin Tarantino, music artist Deadmau5, and even former First Lady Melania Trump. However, Korner warned that celebrities, who can easily sway the price of digital assets given their huge platforms, aren’t immune to criminal probes from the IRS.
Last year, the SEC announced it had settled charges against boxer Floyd Mayweather and music producer DJ Khaled over allegations they failed to disclose payments received from promoting investments in initial coin offerings on social media.
During fiscal year 2021, the IRS Criminal Investigation Unit seized $3.5 billion in cryptocurrency. Cryptocurrency accounted for 93 percent of the IRS criminal investigation seizures.
Korner said the Criminal Investigation Unit ended the year with 80 active cases still in its inventory in which the primary violation was tied to cryptocurrency. He said the unit is training all of its staff on the issues surrounding both NFTs and cryptocurrencies, adding that “this space is the future.”
To that end, Korner explained, the IRS hopes to increase its collaboration and information sharing with other agencies in the federal government, including the Department of Justice, so officials can stay ahead of the criminals.