Digital art scams multiply amid boom in NFT marketplaces

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Artist Rei Yumesaki learned in late November from one of her fans that her digital art was being offered for sale on a US website without her permission.

Yumesaki had created a 3D model of a cute anime-like character she calls Tsukuyomi-chan. She has made it available to the public online as free material that anyone can use for their own purposes – as long as they abide by the terms of service.

But the character was offered for sale without a copyright notice, violated those terms, and was disguised in such a way that no one would know it was material licensed for free use.

“I have given my work freely on the Internet to help other people, but I am saddened to see that my works have been used fraudulently,” Yumesaki said.

She is one of a growing number of artists to do this.

The lack of safeguards and verification procedures in some digital art marketplaces has contributed to the rise of digital art fraud and raised copyright concerns for artists like Yumesaki, who are scammed when their creations are sold behind their back.

It also creates a buyer protection atmosphere for potential customers who may find it difficult to get their money back after learning that they have in fact purchased a stolen work.

The website where Yumesaki’s character was listed is called OpenSea, one of the largest NFT marketplaces in the world.

An NFT, or non-fungible token, is a unique digital identifier that cannot be copied. It acts as a form of proof of ownership for digital artworks or similar intangible assets.

NFTs are extremely difficult to create or duplicate because they are stored on a blockchain, which is a digital cryptographic ledger.

They enable the owner to effectively own a digital asset, including everything from photos, videos, and short animated clips to music, artwork, video game items, and more.

NFT Certificates are traded on websites called NFT Marketplaces such as B. OpenSea – sometimes for amazing amounts of money.

A digital artwork created by a US artist was sold through one such online marketplace in March 2021 for approximately $69.3 million, which helped fuel the boom in online NFT auctions.

But with the rapid growth of online marketplaces for digital artworks, so has the number of fakes being found and traded on them.

Under the OpenSea Terms, OpenSea prohibits the infringement of another person’s intellectual property and the sale of items obtained illegally.

Still, items can be offered for sale without first going through a vetting process, so someone who found Yumesaki’s works online could easily list them on the marketplace.

Yumesaki complained to the website owner about the copyright infringement, and soon after, her work was removed from the website.

“Please pay attention to whether NFT artworks are stolen when you buy them,” Yumesaki said.

A company employee living in Gifu Prefecture recently had to learn this lesson the hard way after purchasing an NFT that turned out to be fraudulent. In early December 2021, he bought an NFT for artworks listed on OpenSea for nearly 3,000 yen.

But a few days later, the item he bought suddenly disappeared from the website.

When the man investigated the matter, he found that the original creator warned on Twitter that the work had been “offered for sale without permission.”

The man wrote to the website operator for compensation but received no response.

According to Kentaro Okamoto, a lawyer specializing in digital rights, buyers of NFT artworks that have been offered for sale without permission could in some cases seek damages from sellers.

“But some buyers would be forced to forego filing a lawsuit because it would take a tremendous amount of effort for them to start a lawsuit,” he said.

The attorney also said that many marketplaces set their terms of service to shield website owners from being responsible for such issues or having to pay damages.

Several domestic IT companies that have launched NFT marketplaces have implemented systems to prevent illegal sales.

An NFT marketplace launched in April last year called nanakusa introduced a system for registering artists who can offer their works for sale.

The website operator conducts online interviews with artists to assess their qualifications and prevent listings from illegal sellers.

Around 600 people have applied for registration so far and around 190 of them have already been accepted.

The NFT marketplace “Adam byGMO” launched by the GMO Internet Group in August last year has also introduced a screening system.

The website operator confirms artist identities and their artistic background before they can sell their works.

Okamoto said the system is necessary to detect attempts at illegal sales.

“It is important to create markets where sellers and buyers can trade safely in order for the NFT market to grow healthily,” he said.

(This article was written by Yasuyuki Onaya and Yoshikatsu Nakajima.)

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