A Bad Week for NFTs 🙃
A marketplace full of fake trades, and the potential for money laundering
Cultured is a newsletter by Otis that gets readers up to speed on the most interesting things going on at the intersection of finance, art, collectibles, NFTs, and more.
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🗞 STORIES OF THE DAY
LooksRare’s NFT marketplace may be full of fake trades
LooksRare, an OpenSea-type marketplace, has generated almost $11 billion in trading volume since it launched last month. All of the top 100 most expensive trades this year have happened on the platform. The problem: it might all be fake.
Those top 100 deals happened between just 16 wallets tied to LooksRare. Just two wallets conducted $1.3 billion in sales last month, mostly by trading NFTs back and forth between each other.
It could be two really enthusiastic traders volleying NFTs back and forth. More likely, these accounts are taking advantage of LooksRare’s incentive structure, which offers tokens as rewards for trading on the platform.
Our Take: LooksRare may be able to say it’s the biggest NFT marketplace by monthly volume, but the data doesn’t give the whole picture.
Remember in Stats 101 when they said that data doesn’t always show the full picture? This is what they’re talking about. Last month, LooksRare’s daily trading volume was around triple that of OpenSea. But LooksRare had around 3,500 daily traders for most of the month, while OpenSea had around 80,000 every day. When you look at it in context, LooksRare’s numbers start to look a lot less impressive and a lot more like a (surprisingly legal) sham.
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The US government thinks NFTs are being used for money laundering
The Treasury recently released a report on money laundering in the art world. While there was little evidence of money laundering in the traditional art market, the report found that NFTs could be used to clean ill-gotten funds.
The report ultimately decided against pushing for additional regulations on the art market, a move opposed by anti-money laundering advocates. However, it did identify several issues with the NFT market that it believes should be addressed soon in order to prevent abuse.
Concerns about terror organizations and other bad actors laundering money through the art world have been at the forefront for several years. These worries even led to legislation that restricted antiquities trading, a market that’s been repeatedly tied to terror groups.
Our Take: Regulation may be coming for the NFT market, but it’ll face some major hurdles.
Worries about money laundering may ultimately result in regulators putting limits on NFT sales or requiring that marketplaces collect additional information on buyers. Similar moves are already being considered elsewhere in the crypto world. A big challenge for investigators looking at NFT money laundering is the speed of transactions — since sales can occur in real time and in rapid succession, it can be incredibly difficult to track criminals. Controlling the speed of transactions will be one of regulators’ biggest challenges.
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✨ AROUND THE INTERNET
The Brooklyn Museum will host Virgil Abloh’s first posthumous show over the summer. “Figures of Speech” will survey two decades of the iconic designer’s work.
Sotheby’s is auctioning off 100+ CryptoPunks in a single lot that’s expected to fetch around $25 million. Can someone figure out what the per-pixel price is?
Half of a rare Honus Wagner card known as the “Holy Grail” of sports cards sold for $475,000 at auction. Guys, this isn’t what we meant when we said you should buy fractionalized shares.
The World Wildlife Fund tried to make an eco-friendly NFT. Then it found out that it isn’t possible.
Every time I go to an estate sale I’m hoping for one of these: A Dürer purchased for $30 is now valued at $10 million. Talk about ROI.
This guy is the Super Bowl’s biggest fan. He’s collected almost 150 vintage tickets and is just 10 away from owning a full master set.
The Justice Department finally arrested the couple who stole nearly $4 billion in Bitcoin from Bitfinex back in 2016. Oh, and one of them (who calls herself the “Crocodile of Wall Street”) made this grating piece of music.
