Booming NFT art market plagued by ‘mind blowing’ fraud

As the NFT market explodes into a $25 billion industry, artists fear that lax oversight will lead to a digital art world awash in fakes.

* The NFT market exceeded $25 billion in 2021

* One platform flagged 90,000 potential NFT counterfeits in three months

* The art world is divided on whether NFTs help or hurt artists

By Avi Asher-Schapiro

LOS ANGELES, Jan. 18 (Thomson Reuters Foundation) — Before he passed away in 2019, Dan Howard was a concept artist, working with major video game companies and posting his designs online, where he amassed a loyal fanbase.

In late 2021, an anonymous online account began auctioning off Howard’s work in the form of non-fungible tokens (NFTs), a kind of digital asset often tied to an image or artwork.

Howard’s family only found out about the sales when a fan alerted them.

“We felt like we had been victims of a high-tech grave robbery,” his brother Donovan told the Thomson Reuters Foundation in a telephone interview.

Donovan emailed OpenSea, the NFT marketplace where his brother’s work was posted, and the platform removed the auction a few days later – but within weeks more images were up for sale .

“We felt helpless,” said Donovan, who is still waiting for OpenSea to remove the latest counterfeits.

An OpenSea spokesperson said “it is against our policy to sell NFTs using plagiarized content, which we routinely enforce in a variety of ways, including delisting and, in some cases, banning accounts”.

OpenSea did not respond to requests for comment on Howard’s case, specifically.

The NFT market has exploded over the past year, with NFT sales topping $24.9 billion in 2021, up from just under $95 million the year before, according to market tracker DappRadar.

This boom has coincided with a massive increase in fraud, said Moti Levy, chief operating officer at DeviantArt, an online platform with 61 million registered users where artists can display digital art and sell prints. physical.

Typically purchased with cryptocurrencies, NFTs represent a digital item – often an image or video.

The transaction is recorded on a blockchain – a public digital ledger – with a unique digital signature, giving NFT art owners a kind of digital “bragging rights”.

In some NFT marketplaces, anyone can upload any image, create an NFT related to that art, and list it for sale, all without having to prove ownership of the original image.

DeviantArt is currently scanning various blockchains for potential instances of this type of fraud.

It has reported more than 90,000 since it started scanning in September, with its alerts for NFT breaches increasing more than tenfold in the first three months alone.

While Levy thinks NFTs can be a useful tool for artists to sell and trade their work, the technology is also driving art theft on a “mind-blowing” scale, he said.

DIVIDED ARTISTS

The NFT boom has divided visual artists. Some see selling NFTs as a way to exert more control over their art and find new audiences, while others say the industry is too saturated with scammers and too often rewards viral art for bad quality.

“Anyone can take someone else’s image and upload it as NFT, hoping it will sell,” said RJ Palmer, a California-based artist whose work is regularly turned into NFT. without his permission.

“Art never matters – it’s just play.”

Aaron Ferguson, an artist in Canada, disagrees, saying NFT’s sale of his work has boosted his career – he recently received a grant from Obscura, an artist collective that supports photographers from around the world. the NFT scene.

The problems blamed on NFTs – fraud and the infusion of shoddy art – have always existed in the art world, he said.

“You can’t scapegoat NFTs,” he said, adding that he much prefers the NFT scene to posting images for free on websites like Facebook or Instagram.

Sales of NFTs prove to be quite lucrative for some artists, and the tokens can be coded in such a way that the original artist can receive a royalty each time the NFT changes hands.

In 2021, an NFT of a collage of 5,000 images and drawings by artist Beeple sold for nearly $70 million at Christie’s, with a 10% royalty encoded.

NFT marketplaces are required to have a process for copyright owners to submit takedown requests, and the user who originally listed the art has the option to respond if they claim to be the owner legitimacy of the work.

Injured artists can also theoretically contact whoever listed their work for sale, explained Moish Peltz, a Florida-based attorney who specializes in NFTs and blockchains.

But dealing with market fraud can be a long and complicated process, and seller accounts can be anonymous cryptocurrency wallet addresses that are difficult to link to a real person.

DeviantArt’s Levy claims that its scanning software has detected bots programmed to scrape the internet, copy artists’ work, and automatically post it to NFT auction blocks.

“It can turn into a real game of cat and mouse,” Peltz said.

Access control levels vary between NFT markets. Some, like Foundation, require an invite to post a sale. Others, like OpenSea, allow anyone with a cryptocurrency wallet to use the platform.

While it’s easy to create a non-fungible token from someone else’s work, one of the benefits of the NFT market is that the blockchains that store the tokens are easily scanned and inspected, making them more likely to catch art thieves, said Ferguson, the Canadian photographer.

That’s small consolation for Donovan Howard, who’s been emailing OpenSea for more than two weeks to get his brother’s pirated work removed. “It’s incredibly painful,” he said.

‘I DROPPED’

Palmer, the California-based artist, sometimes says he gets dozens of alerts a day from DeviantArt that his work is being sold without his permission on OpenSea.

Last year, he successfully petitioned OpenSea via email to remove some auctions from his work.

But, in recent weeks, the platform has asked artists to submit a Digital Millennium Copyright Request, the formal legal mechanism for copyright owners to request that their work be removed from a platform. accommodation, Palmer said.

“I gave up on submitting these requests, it’s taking too long,” he said.

Artists like Palmer want platforms like OpenSea, which was recently valued at $13 billion, to invest more in proactively ensuring artists’ work isn’t ripped off.

Some have given up petitioning OpenSea and started submitting their complaints directly to Google, which hosts the images on the OpenSea auctions.

The OpenSea spokesperson said in a statement that the company is expanding its efforts “across customer support, trust and safety, and site integrity so we can act faster to protect and empower our community. and our creators”.

James Grimmelmann, professor of digital law at Cornell Law School, said that as long as NFT platforms respond to complaints from copyright holders, they operate within the law — even if scammers are rampant.

Grimmelmann said NFT marketplaces face the same thorny problem that the older generation of internet platforms still grapple with: how to moderate online content at scale enough.

“NFTs don’t solve that problem,” he said. “These platforms are just the latest to find out how hard it really is.”

(Reporting by Avi Asher-Schapiro @AASchapiro, Editing by Jumana Farouky. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, which covers the lives of people around the world struggling to live freely or fairly. Visit http: //news.trust.org)

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