The boom in NFTs has led to a spike in crime around digital collectibles. Here are 2 of the most rampant schemes, according to Chainalysis.

• Non-fungible tokens skyrocketed in 2021 riding the broader cryptocurrency boom.
• In 2021, around $44 billion worth of crypto was sent to NFT-related smart contracts, up from $106 million in 2020, according to Chainalysis.
• The firm identified two rampant schemes criminals used in 2021: wash trading and money laundering.

Non-fungible tokens skyrocketed in 2021, riding the broader cryptocurrency boom, and criminals took advantage.

NFTs — digital representations of artwork, sports cards, or other collectibles tied to a blockchain — have surged in popularity as investors from Wall Street and Hollywood get onboard.

In 2021 alone, around $44 billion worth of crypto was sent to NFT-related smart contracts, up from just $106 million in 2020, according to blockchain analytics firm Chainalysis.

But with this elevated consciousness came an increase in crimes. Here are two rampant schemes Chainlysis has tracked in the past year.

Wash trading

Wash trading is the illegal process in which a seller is on both sides of a trade to manipulate an asset's value and liquidity. This typically occurs in crypto exchanges that attempt to boost their trading volumes.

In the case of NFTs, an investor would sell a token for a higher price to a wallet that he also owns — a relatively seamless process in this space where there is no need to disclose one's identity, Chainlysis explained.

For 2021, the firm found that while most NFT wash traders have been unprofitable, the successful ones gained handsomely. Of the 262 wash traders tracked, only 41% were profitable but they raked in nearly $8.9 million. The rest lost nearly half a million.

"NFT wash trading exists in a murky legal area," the report said. "While wash trading is prohibited in conventional securities and futures, wash trading involving NFTs has yet to be the subject of an enforcement action ... We encourage NFT marketplaces to discourage this activity as much as possible."

Money laundering

Money laundering has plagued the traditional financial world but has grown to be more pervasive in the digital asset realm, much to the concern of regulators.

Chainlysis found that around $3 million was sent to NFT marketplaces by illicit addresses last year, up from less than $500,000 in the prior year. In the last two quarters of 2021, the vast majority of this activity came from scam-associated addresses, the firm said.

In one example from the fourth quarter, roughly $284,000 worth of crypto was transferred from Chatex, a virtual crypto exchange on the US government's Specially Designated Nationals List, which includes suspected money launders as well as suspected terrorists and drug traffickers, among others.

Apart from these two schemes, there are other pervasive techniques used by criminals. But Kim Grauer, head of research at Chainalysis, said the firm focused on these two types because they are "extremely straightforward" to analyze on the blockchain.

"This does not necessarily mean they are the biggest types of crime, because the industry has not really been around long enough to see the extent of fraud and scamming on users," she told Insider. "We expect 2022 to be a big year for crime on NFTs and will be keeping a close eye on the ecosystem."