The NFT marketplace that sold Jack Dorsey’s original tweet for $3 million shuts down, citing rampant fraud.
The NFT marketplace Cent has halted transactions on the exchange. Founder Cameron Hejazi says people are selling NFTs of content that does not belong to them. Hejazi calls this a fundamental problem in the digital assets market, which reached $25 billion in sales in 2021 alone. Reports of scams, counterfeits, and ‘wash trading’ are all rife on NFT platforms. Cent reached the height of its fame when it sold Jack Dorsey’s first tweet as an NFT last year.
“There’s a spectrum of activity that is happening that basically shouldn’t be happening, like legally,” Hejazi told Reuters. He highlights three issues NFT marketplaces face in order not to facilitate fraudulent transactions. People are selling unauthorized copies of NFTs, people are making NFTs of content to which they do not own the copyright, and people are selling NFTs that resemble a security.
Hejazi says the situation became impossible to police on the Cent NFT marketplace, so it shut down.
“It kept happening. We would ban offending accounts, but it was like we were playing a game of whack-a-mole. Every time we would ban one, another one would come up, or three more would come up,” Hejazi confirms. Cent had around 150,000 users and revenue ‘in the millions.’ It’s a relatively small fish in terms of NFT marketplaces.
Hejazi says he believes rampant fraud is a problem across all NFT marketplaces, not just Cent.
OpenSea is valued at $13.3 billion in its last funding round. But last month, the marketplace said more than 80% of the NFTs minted for free on its platform were “plagiarized works, fake collections, and spam.” OpenSea has tried limiting what users can do for free but quickly faced backlash from the community.
It’s unclear how these NFT marketplaces will operate within legal bounds. OpenSea says it is working on a “number of solutions” to help it deter bad actors, but it’s not immediately clear what the solution will be. Cent’s solution was to halt transactions entirely, effectively shutting down the platform. And Cent’s Founder Cameron Hejazi says the whole industry feels like “money chasing money.”
Money chasing money pretty aptly describes the NFT marketplace in the music industry, too. Last week, Digital Music News reported on the shut down of the HitPiece platform. HitPiece was offering NFTs of artists’ music from those who never consented to having their art used that way. The action drew legal scrutiny from the RIAA, which is ongoing.