NFT is a new form of virtual asset investment. Common NFT includes digital image, audio-visual file and video clip which encrypts into a block chain. The private key’s owner is regarded as having the ownership of that NFT.
NFT is a new form of virtual asset investment. Common NFT includes digital image, audio-visual file and video clip which encrypts into a block chain. The private key’s owner is regarded as having the ownership of that NFT.
The concept of NFT is similar to that of Bitcoin. When Bitcoin is stored at a specific address, the private key’s holder can be regarded as the owner. Both NFT and Bitcoin are stored in encrypted asset wallets or on platforms, the only difference lies in that the concept of NFT only changes Bitcoin into digital artwork. Different from the traditional trade of goods, trade of NFT is basically paid in crypto asset (e.g. Ether).
The most common risk is phishing scam. Scammers send out SMS or emails impersonating NFT wallet platform, tricking users into visiting a fraudulent website. On the website, users are requested to enter the recovery phrase of the wallet, or by popping up a fake transaction message, the users are requested to connect the wallet and confirm the transaction. Upon the users’ confirmation, NFT in the wallet will be taken away. Another situation is via compromised mobile phone or computer by Trojan Horse, in which hackers hijack the users’ wallets and transfer their assets away.
Besides, investors and collectors should be aware of the risks of pirated and infringing NFT artworks. As digital images and audio visual artworks are so easy to duplicate, infringers are often easy to unauthorised reproduce physical artworks into NFTs for profit. As a result, investors may buy pirated or infringing artworks without knowledge.
What’s more, offenders may execute wash trading using NFT artworks. That is, repeatedly sell and buy themselves the artworks in a short period of time in an attempt to artificially inflate their prices. “Wash trading” is an old security market manipulation practice, which is regarded as illegal in Hong Kong security market. However, manipulating the prices of NFT artworks and virtual assets are not regulated in Hong Kong. Investors should understand all risks associated thoroughly.
Two NFT loss reports were received during the third quarter of 2021, in which the informants reported the artwork images in the form of NFT were transferred away. Police reminded that fraudsters could stole the account information of virtual asset platform through phishing websites and security loopholes of public free Wi-Fi. Upon logged in, the NFT artwork image and other crypto assets could be transferred without the owners’ knowledge. The public should be aware of relevant information security risks.
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