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Comment by PragmaticPulp | Hacker News Reader

> This would have been more interesting if the author had traced where all the money being plowed into NFTs is coming from.

Not possible to trace where the money is coming from.

In fact, someone can "sell" an NFT to themself in a wash trade between two wallets they control. The last trade price of the NFT is now recorded as the transaction price, but it's possible that money never actually changed hands.

Want to have an expensive NFT? Just trade it to yourself for as much money as you have in your crypto wallet. You keep the money, you keep the NFT, but now everyone can see that someone "paid" a certain amount for it.

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> Not possible to trace where the money is coming from.

Chain analysis is certainly something you can do.

Can't you just wash your transactions with Monero?

I don't know of a great bridge between Ethereum & Monero.

You can use TornadoCash on Ethereum & this was used in a recent scandal involving NFTs by the ex-head of product of openseas.

This is what happens whenever you see a large amount associated with an NFT. I bet that the art market started like that.

Wash trading was a pretty common scam in loads of markets until it was regulated.

Art market started because people appreciate art. In fact rich people even commissioned art for hundreds, if not thousands of years.

It can be used for various scams and as an investment, but the whole premise is ridicolous: people pay for art since they like it and want to own it. (And in this NFT scam they dont own anything useful)

I disagree. Art was never expensive, and artists are known to make little money until their death. Price of selective art really went through the roof for no reason other than creating a market to make money.

patrons pay for art because they want the art to be made, owning it is a side effect (indeed much art is loaned right back out to galleries, the possession is not the point, the creation is)

> In fact, someone can "sell" an NFT to themself in a wash trade between two wallets they control. The last trade price of the NFT is now recorded as the transaction price, but it's possible that money never actually changed hands.

I heard rumors this is what happened with the Beeple nft

Beeple actually got paid, though, and (smartly) cashed it all out into fiat.

...and then returned it quietly to the person who had loaned it to him temporarily to elevate his brand?

That's at least riskier to do with "fiat" (not that it would be legal with blockchain money either).

Why would it be illegal? Wash sales of NFTs aren’t illegal, as far as I understand. It could be a legitimate marketing procedure.

Huh, I didn't know that. Geez, this is scammier than I thought, and it was already pretty scammy.

E: I looked around a bit and can't find any source for this, so I guess it's just a rumor?

Hence the question mark. I imagine most high profile NFT sales are simply wash sales for the publicity.

Can't you do that at normal auctions using (for lack of a better word) a shill bidder?

Yes, but the auction house takes a cut and the taxman might notice so it's not without risk. Usually a shill bidder doesn't want to win the actual bid.

You could, and it likely happens in some cases.

However, an auction house is going to take significant fees as a percentage of the sale price and your shill bidder will want a cut as well. You’re also going to get a large tax bill because you technically had a realized capital gain and the auction house will report it.

With NFTs you can do a blockchain transaction for a relatively small fee by yourself from your computer. No taxes owed because you didn’t actually sell anything.

There are taxes as mining fees

Isn't it basically a flat tax, not dependent on the value "claimed" by the transaction, that is easily drowned for any transaction that would make such a scam worthwhile anyway?

What about gas? ( honest question)

I thought that‘s what often happened in the traditional art market as well. I know it happens in the retro video game market.

Yes, and it's rampant in all sorts of collectibles markets. There are some people doing it very publicly with vintage video game cartridges right now, and "pawn stars"-type game shows are largely marketing for the scam.

Are there mining fees to pay when you do that? I'm not up to speed on selling NFTs.

Yes, if you trade it on a marketplace such as OpenSea. You could argue that the benefits and upside of wash trading outweigh the cost (about $10 per tx).

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