There has been an ongoing controversy brewing between marketplaces about how to deal with the problem of stolen NFTs. Through social engineering and phishing scams, bad actors can easily trick a user into signing a fraudulent contract link that instantly transfers their NFTs to a scammer’s wallet. Scammers then typically resell those stolen NFTs on secondary marketplaces like OpenSea, LooksRare and Blur. Given the immutable nature of blockchain transactions, there is nothing that can done to reverse the original theft of these NFTs. Crypto Criminal Defense Lawyer
As I’ve previously discussed, the resale of flagged NFTs comes with its own unique set of risks. Knowingly selling stolen “flagged” NFTs can potentially expose traders to criminal prosecution and/or civil lability. In response to this problem, OpenSea attempted to stop the resale of stolen NFTs to secondary buyers by way of a flagging mechanism. Basically, if an NFT holder filed a written report with OpenSea that the NFT was stolen, then OpenSea would flag that NFT and prevent any further resale of the token. The problem of course was that without an immediate freeze of the NFT, these stolen tokens would be bought and sold several times over before being flagged. This created a scenario in which bona fide purchasers were innocently buying NFTs, without any knowledge they were previously stolen, and then getting stuck holding “flagged” NFTs in their wallets.