UK tax authorities seize NFTs in fraud probe

The dark side of the non-fungible token art market came into focus this week as the UK tax authority, HM Revenue & Customs, announced its first seizure of three NFT-backed works. Three people were arrested as part of a wider investigation into a suspected £1.4mn tax fraud that allegedly involved 250 fake companies, HMRC said. The seizure “serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC,” says Nick Sharp, HMRC’s deputy director of economic crime.

Earlier this month, the US Treasury released a study on the facilitation of money laundering and terror financing through the art trade. This found NFTs could be used for “self-laundering”, where criminals “transact with themselves to create records of sales on the blockchain”.

Bernadine Bröcker Wieder, co-founder of art-tech platform Vastari, notes that we don’t yet know the details of how the NFTs were used in the HMRC investigation but that “there are lots of scams going on and tax is the first way to catch criminals”. However, she says, “NFTs are the worst place to commit a crime. It is impossible to conceal your identity for long, so I don’t think they will last as a place to hide wealth.”

Art-fair consolidation is in the air post-pandemic. The latest news is that Photo London has sold a 25 per cent stake to the World Photography Organisation, which also runs Photofairs Shanghai.

“There is going to be more of this collaboration as art fairs reset in certain ways,” says Scott Gray, founder and chief executive of the WPO. “Photo London is a natural evolution — we have hugely complementary strengths.” He doesn’t rule out taking a bigger stake in the future — “never say never” — but says that this is not his priority. Financial details of the deal have not been disclosed.

Photo London’s organisers are upfront about the challenges of the past few years. “Brexit followed by a global pandemic was not the situation we expected when we set out in 2015,” says co-founder Michael Benson. Fellow founder Fariba Farshad says: “We’ve always been a small organisation and it felt a bit lonely out there.” They describe the WPO deal as a way to safeguard the future of a fair popular with gallerists and collectors.

Key to the partnership is the WPO’s reach among institutions and collectors in Asia where, Gray says, “we have seen first-hand a huge market for contemporary photography”. Photo London returns to its usual spring slot in Somerset House this year (May 12-15).

The UK’s 2018 Ivory Act, which makes it illegal to deal in most antique ivory, is now expected to come into force this spring, prompting dealer Michael Baggott to launch what he calls the Antiques Rescue Centre.

“I don’t agree with the trade in modern-day ivory, it’s despicable. But before the 20th century, ivory was as ubiquitous as plastic is now,” he says. “So there are people who have inherited a box or two of things that are now illegal to sell. There is now an option not to throw history into the bin.” He is encouraging auctioneers, dealers, collectors and others to contact him with works for possible donation, for preservation purposes, at antiquesrescuecentre@btinternet.com.

Is it RIP for OVRs? Online viewing rooms became vital alternatives to physical art fairs during the pandemic but, as life returns to normal, rather than heralding a new way to do art business, their role has diminished to a supplementary service. Standalone online events, unconnected to an existing fair, now seem to have had their day: Art Basel hosted its last such showing with OVR:2021, a sales platform for art made last year, which ran February 9-12.

London gallerist Pippy Houldsworth was among the 59 online exhibitors who had success, selling all four works by Angela Heisch (priced between $10,000 and $60,000 each). However, she says: “OVRs have been incredibly useful but have served their time in their current form. There is a place for online shows, for the reach they get and particularly to stop us all traipsing around the world, which is terrible for the environment. OVRs will develop as the technology develops.”

Marc Spiegler, director of Art Basel, says: “The industry may have focused on the physical, once large-scale events were imaginable again, but there is no question that there will be much more from us on the digital front.”

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