The Dark Side of NFTs

January 31, 2022 - Since the mid-2021 we have heard stories of early NFT investors made millions in trading these collectibles. So what are NFTs? In the simplest terms, NFTs transform digital works of art and other collectibles into one-of-a-kind, verifiable assets that are easy to trade on the blockchain. Some of the earliest implementation of collectible NFTs were the CryptoPunks (established June 23, 2017) and CryptoKitties (established November 28, 2017).

According to NFT industry data aggregator CryptoSlam, Larva Labs’ overall minimum transaction volume runs around $200 million, and that places the price of CryptoPunks ranges from $30,000 to $10 million in Ethereum. Onchain data indicates that some Cryptopunks are being sold well above of $50M as of publication date.


With all these gains and with these potential values waiting to be unlocked, it is no surprise that NFTs become a playground for hacks and scams. Let's talk about the dark side of NFT in details.


Since NFTs are relative new transaction events on the blockchain, public data did not become more prevalent until the later part of 2021. Accordingly, the data analytics provided here are based on Zero Friction’s database of hacks and scams using public information from these periods.

The biggest loss since start of 2022 is Lympo, accounted for $18M of the $23M tallied so far. According to public information, the sports nonfungible token (NFT) minting platform and Animoca Brands subsidiary Lympo suffered a hot wallet security breach and lost 165.2 million LMT tokens worth $18.7 million at the time of the hack. Ten different project wallets were also compromised in the attack. It appears that most of the stolen tokens were sent to a single address, swapped for Ether (ETH) on Uniswap and SushiSwap, then sent elsewhere. Note that in this specific instance the loss was attributed to a private key leak from the hot wallet.

Rug pulls also accounts for the second most method related to NFTs. Notable rug pulls took place in 2022 include:

  • Blockverse – $1.2M. This alleged NFT rug pull played on the theme of Roblox (https://www.pcgamer.com/unofficial-minecraft-nft-game-blockverse-disappears-with-more-than-dollar1m/). However, onchain data seem to indicate that the majority of the funds remain at address 0x7d82c0fc40d417ef89870a2c08d1a3c6a1315703. More details in this still unfolding event can be obtained from here (https://www.breadcrumbs.app/reports/1000).

  • Big Daddy Ape Club – $1.3M. This rug pull currently holds the largest NFT rug pull title on Solana Network in 2022. Sadly, the project was also verified via the CIVIC Pass Program which now brings into question if third-party verification can effectively identify potential rug pull candidates. Solana Network had it first NFT rug pull in 2021 on IconisSOL where $156k were taken.

  • Frosties – $1.3M. Frosties may have been the first NFT “rug pull” of 2022 where the anonymous creators vanished after investors poured $1.3 million into the cartoon ice cream digital collectibles. The funds were washed through an Ethereum Mixer, Tornado Cash, and are no longer traceable onchain. More details of the heist here (https://www.breadcrumbs.app/reports/999).

OpenSea and Ethereum network remain the platform and network, respectively, for the losses from 2022. No surprise in that as the NFT evolution starts on Ethereum with the CryptoPunks collection in 2017.

Finally, here we have our running tallies of losses from our database since 2011. Keep in mind the total loss amounts include major losses from Ponzi schemes such as OneCoin, Dos Santos and others which may significantly impact the total losses. The way the number appears and we are just one month in for 2022, 2022 will likely be a significant year for losses.