In the wake of widespread misuse of cryptocurrencies for money laundering and hawala-based remittances, a new study claims that money laundering through the sale and purchase of NFTs is apparently a booming business in which malicious hackers use illicit funds to purchase NFTs.

According to blockchain data platform Chainalysis, a small but growing portion of activity in the NFT market may be attributed to financial fraud

The study said Wednesday, "While money laundering in the physical arts is difficult to quantify, we can make more reliable estimates of NFT-based money laundering due to the inherent transparency of the blockchain."

The value of virtual currency sent to the NFT market via illegal addresses increased significantly in the third period of 2021, exceeding $1 million

"In both quarters, the vast majority of such activity came from addresses associated with scams that sent funds to the NFT marketplace to make purchases," the report disclosed. "Perhaps most concerning is that in the fourth quarter, we saw approximately $284,000 worth of cryptocurrency sent to the NFT marketplace from addresses that were at risk of sanctions," the researchers said.

This amount increased again in the fourth quarter, reaching nearly $1.4 million.

During these two periods, large amounts of stolen funds were also transferred to the market.

NFT does hold information about the blockchain and that information can be associated with images, physical objects, videos, memberships, audio and a host of other emerging use cases.

In 2021, NFT's reputation soars. Chainalysis monitors at least $44.2 billion in cryptocurrency sent to ERC-721 and ERC-1155 contracts – the two ethereum smart contracts associated with the NFT market and collection – up from $106 million in 2020. 106 million.

Growing cleaning transactions between NFTs

"Wash trades," where sellers paint a misleading picture of asset value and liquidity on both sides of a transaction, is another area of concern for NFT."

The study also found that 262 users used blockchain analytics to successfully sell NFTs to self-funded addresses more than 25 times.

"To make matters worse, the $8.9 million likely came from sales to unsuspecting buyers who believed the value of the NFTs they were buying kept growing, selling from one different collector to another," Chainalysis said.

The 110 lucrative shuffle dealers made nearly $8.9 million from such activity, far exceeding the $416,984 shortfall of 152 non-profit shuffle dealers.

"NFT offers the potential for abuse. Importantly, as our industry considers all the ways in which this new asset class can change the way we connect the blockchain to the physical world," the report said.

According to findings released last November, India's Enforcement Directorate (ED) uncovered more than Rs. 40 billion in illegal activity through cryptocurrency exchanges the following year.

How to be safe when investing and stay away from scams?

Therefore, avoidance is easier to obtain than cure. The main way to prevent getting scammed is to make sure you know who you're dealing with, that you're dealing with respected exchanges, and that all the channels you use are verified. If an offer seems too good to be true, it almost always is.