U.K. tax regulator HMRC seizes first NFTs in $1.9 million fraud case

The confiscation "serves as a warning to anyone who thinks they may utilize crypto assets to hide money," according to the UK's tax office.

The confiscation "serves as a warning to anyone who thinks they may utilize crypto assets to hide money," according to the UK's tax office.

Her Majesty's Revenue and Customs, the UK's tax department, has confiscated three NFTs for the first time as part of a criminal investigation into suspected VAT fraud involving 250 alleged bogus companies.

For the First Time, HMRC Seizes NFTs

The UK's tax watchdog has jurisdiction over NFTs. According to The Telegraph, Her Majesty's Revenue and Customs has seized three NFTs and detained three people on suspicion of attempting to defraud it of £1.4 million worth about $1.89 million.

The asset seizure was part of a criminal investigation into a suspected VAT fraud case involving 250 purported fictitious firms, according to HMRC.

Virtual Private Networks (VPNs), unregistered mobile phones, stolen identities, false addresses, false invoices, shell companies, and pretending to engage in legitimate business activities were among the "sophisticated methods" used by the three suspects to hide their identities and criminal proceeds, according to the tax agency.

The confiscation should prevent anyone who thinks they can hide unlawful proceeds using crypto assets from the agency, according to the agency's deputy director Nick Sharp. He stated,

“[The NFT seizure] serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC. We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets.”

According to HMRC, this is the first instance of U.K. NFTs were seized by law enforcement, but no further information was provided.

Based on the minimal information provided by the agency, the NFTs were used to hide the illegal proceeds rather than for actively performing the crimes.

The FBI has also remained tight-lipped about how it came into actual possession of the assets. NFTs, like other crypto assets, are held on blockchains and must be spent using private keys stored in digital wallets.

It's unknown whether or whether the HMRC gained access to the suspect's digital wallets, and if so, how.

NFTs have exploded in popularity in the last year, attracting celebrity endorsements, high-fashion houses, gaming firms, fast-food chains, and technological organizations.

As a result, they've become a source of concern for regulatory agencies all around the world.

The US Treasury released a study on illegal finance in the art markets earlier this month, raising serious worries about the expanding NFT sector and its ability to facilitate money laundering.