NFT Rug Pull Leaves Investors $1.3m out of Pocket

Non-Fungible Tokens, better known as NFTs, have continued to grab the news headlines at the turn of the year. While the crypto market has struggled amidst concerns over regulatory risk and FED monetary policy, the NFT market has flourished.

One of the most popular NFT market places is OpenSea, where users can buy, sell, and trade rare digital goods.

The OpenSea NFT Market Place

At the time of writing, PhantaBear held the #1 spot by trading volume on the OpenSea market place, with a 7-day trading volume of E17,791. While down 61% over the last 24-hours, trading volume was up 371% over the last 7-days. Just this week, PhantaBear knocked Bored Ape Yacht Club off the top of the table.

In terms of NFT activity, news hit the wires yesterday that the NFT market place has seen $2.1bn in NFT sales within the first 10-days of the year.  OpenSea transaction volume could reportedly reach $6bn this January. To put it into context, in 2020 total trading volume was just $21.7m before surging to close to $14bn in 2021. At the current run rate, the $14bn will be dwarfed before the halfway mark of 2022.

With OpenSea’s dominance, however, has come thefts and scams that have left investors out of pocket.

A Frosties Rug Pull Costs Investors in the OpenSea Market Place

Overnight, news hit the wires of the creators of the Frosties NFT collection disappearing after investors paid $1.3m in cartoon ice cream NFTs.

In this case, anonymous creators reportedly collected investor funds from the sale of 8,888 NFTs. The Ethereum (ETH) proceeds were reportedly close to $1.3m. OpenSea was unable to take action this time around as the NFTs remain in the market place, while the sales proceeds and the creators have gone.

The latest scam is seen to be the first “rug pull” of the year. A “Rug pull” is a scam promotion of a digital asset via social media. Once the scammer has driven up the price, the scammer sells the asset and the digital asset becomes worthless.

Other NFT Thefts

Late last year, OpenSea was able to intervene in an NFT theft. News had hit the wires of thieves stealing famous art gallery Todd Kramer’s NFT collection from his hot wallet. OpenSea was able to freeze the stolen assets, reportedly worth $2.2m. As a result of the freeze, 16 Bored Ape and Mutant Ape NFTs were no longer tradeable on OpenSea.

Regulatory Oversight

The rapid growth of the NFT market may also draw the watchful eye of regulators. Earlier this week, news had hit the wires of India’s central bank creating a FINTECH division to keep pace with evolution of  cryptos. India’s regulator is not just planning on looking at exchanges, but also NFTs and new crypto launches.

Should the NFT market experience more scams, the NFT market could also come under greater scrutiny in other jurisdictions.