Finally, we have an honest CEO! The CEO and co-founder of the U.S.-based Cent NFT platform has shut the operation down due to rampant fraud and pointed out that this fraud is a common problem for all NFT platforms! This fact should not surprise PaymentsJournal readers. The total lack of provenance was identified in PaymentsJournal on April 2021 and then again July 2021. We identified a range of additional issues in January this year and this month we wondered if Mastercard and Coinbase might create regulations to prevent this easily conducted crime. We identified all of this again on February 2nd and we have previously identified that nothing prevents people from creating NFTs of stolen items, washing NFTs to drive the value up, and using NFTs for money laundering. We also wondered what other crimes were taking place that the platform operators don’t want us to know about, since after all it would damage the Unicorn valuations. Now maybe law enforcement will investigate:
“Hejazi highlighted three main problems: people selling unauthorised copies of other NFTs, people making NFTs of content which does not belong to them, and people selling sets of NFTs which resemble a security.
He said these issues were “rampant”, with users “minting and minting and minting counterfeit digital assets”.
‘It kept happening. We would ban offending accounts but it was like we’re playing a game of whack-a-mole… Every time we would ban one, another one would come up, or three more would come up.’
“MONEY CHASING MONEY”
Such problems may come into greater focus as major brands join the rush towards the so-called “metaverse”, or Web3. Coca-Cola (KO.N) and luxury brand Gucci are among companies to have sold NFTs, while YouTube said it will explore NFT features.
While Cent, with 150,000 users and revenue “in the millions”, is a relatively small NFT platform, Hejazi said the issue of fake and illegal content exists across the industry.
“I think this is a pretty fundamental problem with Web3,” he said.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group