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NFTs: Newest Scammers’ Tool?

December 30, 2021

NFTs: Newest Scammers' Tools?Well, I’ve given in to the pressure, and I’m writing about NFTs. I wasn’t planning on doing so, but then I saw an article in the Washington Post called “Will NFTs transform the art world?” So now I feel obligated to step in with a warning. The Post journalist, Sebastian Smee, tried to answer many of the questions that many are having about NFTs in the wake of Art Basel Miami Beach, where NFTs were prominently featured. But it wasn’t until the very end that Smee revealed a small segment of the ugly truth behind NFTs, mainly the environmental cost. But I’m going to expand on what he may have left out.

Non-fungible tokens (NFTs) are, to put it as simply as possible, a sort of digital image. NFTs use the same kind of technology behind cryptocurrencies, where one’s ownership constitutes owning part of a computer code that also serves as a ledger detailing previous ownership. So, when someone says they own an NFT, what they really have is part of a piece of coding represented by a JPEG image. All that, except more problematic than one would ever think. There have been so many stories of NFT-related lawsuits recently because of one of the most glaring flaws in the concept of NFTs: no oversight of copyright. When someone has an actual image, they can own and monetize it. For example, Gene Simmons owns the rights to the money bag symbol. Yes, the bassist from KISS, the man who wrote “Calling Dr. Love,” holds the copyright to the drawing of the bulging bag tied with string at the top with a dollar sign on it. But with NFTs, this isn’t happening. Currently, anyone can take an artist’s work, turn it into an NFT, share/sell it countless times, and the original artist is not receiving compensation.

Of course, as soon as NFTs became the hot new fad this year, scammers quickly began to take advantage. Because NFTs are not even close to being regulated by any centralized body, it has become common for people to steal an artist’s work, mint an NFT, and then profit from it. This has already happened to Anish Kapoor, Qing Han (aka Quinni), and Derek Laufman, among many others. While some online NFT markets have made sure to act when an artist calls this sort of activity to their attention, they take no preventative measures to ensure that theft and impersonation don’t happen in the first place. So, you don’t need to own the copyright to an image to mint an NFT. Plus, there’s a dangerous lack of oversight for those who deal in NFTs. This makes the very concept a scammer’s dream.

Most people only found out about NFTs because of Mike Winkelmann, also known as Beeple. In March, a collection of his works sold at Christie’s for $69 million. The collection, known as Everydays, started as a challenge to create one digital work every day for over five thousand days. That sort of exercise is a pretty good idea for keeping one’s creativity sharp. But clearly, the collection would not have sold for that much if anyone bothered to look at the actual images. Artnet’s Ben Davis took the time to do just that. Some of them are just bad. Objectively bad. If there weren’t any hype around the idea of NFTs, Beeple would be lucky to get a couple of bucks from his work selling them from a folding table in Times Square. Then you occasionally get a few that are just plain off-putting. Things that are sexualized that shouldn’t be, like the Dalai Lama or Babar the Elephant. Then some may come across as racially-insensitive or sexist. While a lot of that problematic stuff only appears in the project’s first days in 2007 and 2008, Beeple’s more recent additions to the collection have gone off the edge. There are images that not even the creators of the Saw and Human Centipede movies would think possible. Santa Claus killing his elves, a baby-eating monster with the head of Mickey Mouse, and a concerning amount of nude Donald Trumps. The rest of the collection is interesting and inoffensive, like a bunch of well-made screensavers.

Of course, even Beeple isn’t immune from scammers, even to the point of Beeple himself being in on the scam (Input Magazine puts it much better than me, but I’m going to try). The buyer of the Everydays collection, Vignesh Sundaresan (aka MetaKovan), was already known for being a sketchy cryptocurrency trader. After the sale, he announced that he would sell fractional ownership of the collection through his own B20 token. While buying and reselling isn’t uncommon in the art world, there’s something a little fishy going on here. Sundaresan owns 59% of the B20 tokens in existence, while Beeple himself owns 2%. So, while there’s nothing technically illegal here, what seems to have happened is that the buyer and seller arranged for an extensively-publicized multimillion-dollar transaction to take place with the intent of artificially inflating the value of the crypto-token that they own. It’s precarious, maybe a little scammy, and part of me thinks that if NFTs were regulated in any way, this kind of deal would fall under the same sort of white-collar crime as insider trading or pump-and-dump schemes.

But of course, we can never know what actually happened or what may have happened if there were more oversight in this new chaotic corner of the art world. NFTs are definitely here to stay; there’s no doubt about that. And when appropriately regulated, they are a terrific idea that would ensure that artists get paid for their work. But as of right now, NFTs are not perfect. In the same way our ancestors went crazy for things like tulips and spices, the hype and the chaos surrounding NFTs will hopefully lead to clamping down on scammers and grifters. That way, NFTs can indeed become the revolutionary new medium that their proponents say it is.