Friday, December 16, 2022

Trump's NFTs: The dark secret

The media is having a guffaw at Donald Trump's Digital Trading Cards, which feature DT's face pasted onto heroic bodies. Everyone is asking one question: Why would Trump get in on the NFT "craze" long after everyone else finally realized that NFTs are junk?

Even Steve Bannon sneers at the things. Even the Freepers sneer at the things. Who would actually pay 99 bucks for this worthless nonsense?

Someone must be buying this "art." According to Newsweek, nearly 14,000 people have already purchased these trading cards. 

As of early Friday morning, the total Trump NFT collection currently has a value of around 460 Ethereum ($570,000).

Who are these people? 

They may not be the working class, beer-bellied MAGA types you have pictured in your head right now. Kurt Eichenwald is one of the few observers who suspects that something quasi-criminal may be going on. He notes that the cards are sold by a shady organization with a post office box address often associated with sleazy enterprizes.

Another man of sparkling character connected to the address of NFT International is former Ukrainian Prime Minister Pavlo Lazarenko, who was once ranked the eighth-most corrupt official in the world by watchdog group Transparency International. In 2004, he was sentenced to eight years in prison in California for money-laundering and extortion, a scam that used shell companies and offshore bank accounts to hide stolen Ukrainian government funds.

Another man linked to 2710 Thomes is Ira N. Rubin - just one more con artist.

That's Eichenwald's characterization. I do not know Mr. Rubin and I have not researched his history. As far as I know, he may be a perfectly upstanding citizen.

Yes (you may be asking) but what's the bottom line? What's the purpose, the motive, the pay-off? Eichenwald does not tell us. 

Here's a clue: Think about the Trump organization's recent legal troubles involving tax evasion. It's fair to presume that the same thing is still going on. But, in today's environment, pulling off such a scheme requires greater creativity.

NFTs serve one -- and as far as I can see, only one -- practical purpose: Money laundering.  

Behind the facade of a bunch of bored rich dudes buying digital artwork at insanely high prices lays a sinister and twisted money laundering scheme for crypto’s ultra-rich elites to make their illegal profits look legal.

Further on:

Buying an NFT from oneself using illicit funds is an easy way to move money while claiming the funds were used for a legitimate art purchase and avoiding taxes in the process. An example was demonstrated by former USA Today journalist Isaiah McCall on his blog earlier this year where he explained the process:

“If you have $1 million in illegal money, you would spend $1 million on your own NFT. You can do this yourself or use a trusted third-party account. Then you resell the trash for nothing and bank the profits.”

The Department of Justice wants to impose some regulations on NFTs because they have become such a useful tool for criminals.

In a report to President Joe Biden earlier this month, the US Justice Department warned that NFT players could be using the digital assets for illicit financing, by “self-laundering, a sequence in which criminals purchase an NFT with illicit funds and then resell to a purchaser who pays for it with clean funds unconnected to a prior crime.”

Application of the act “often turns on whether the transacted item qualifies as ‘value that substitutes for currency,’” the report notes, while “NFT platforms may take the view that this definition does not apply to their activities—and that they are thus not subject to” the act’s anti-money laundering and combating the financing of terrorism requirements. Further, many platforms fail to appropriately implement know-your-customer systems in a market where assets can change hands very quickly, it noted.

Frankly, at this point, I can't imagine why any licit purchaser would invest a lot of money in an NFT. They're silly.

That said: I'm considering coming up with my own counterversion of Trump's nutty cards, featuring Donald and his buddies as supervillains or monsters. If I go through with this little plan, I'll make it very clear that the whole thing is meant to be a joke at Trump's expense. Maybe I'll ask 99 cents. Even at that price, I would not expect many takers -- but so what? The giggles might justify the effort.

Added note: Even if we stipulate that money laundering did not create the sales figures recorded by Newsweek, there is another explanation for the rapid sales: Wash trading. Basically, that term refers to the same party posing as both buyer and seller of a commodity, perhaps using a cut-out (or even a series of cut-outs) to hide his or her identity. 

Why would anyone do this? The most obvious reason is to drive up the price, thereby making the commodity seem desirable. If you sell an NFT to yourself for $1 million, you have, in effect, transformed trash into a million-dollar product. Someone who buys the thing for $500,000 may think he's getting a bargain.

I would have thought that, after the Great Crypto Bust, this scam was old hat. But apparently it still works.


Gus said...

Interesting. I've been seeing reference to this on Facebook, but couldn't be bothered to find out exactly what it was. I tend to avoid anything related to Trump these days, aside from your own great writing.

I think money laundering is most likely what's going on, though your second option is plausible as well. Trump wouldn't miss the opportunity to make himself richer in any case.

b said...

Trump is playing with archetypes. Why? To see which ones will run best for him. To find out how he should frame his campaign brand if he stands in the 2024 election - and also how he should frame himself so as to keep out of jail before then.

He's a loony but he is not stupid. Don't underestimate the bastard.

"Each Trump Digital Trading Card has a unique pre-assigned rarity. Some will be one-of-one’s (i.e. the only one in the world), while others will be limited to 2, 5, 7, or 10 copies. No Trump Digital Trading Card will have more than 20 copies in existence!"

I wonder whether he's already chosen a number or a set of possible numbers for the overall quantity of images. 22? :-) Probably not. Might be 45 though.

45 = 3 * 3 * 5. Odd numbers are masculine and strong. In any case, he'll find out which particular cards attract most interest. The images may repay study.

Look at the one with the US flag and the Statue of Liberty. What's going on with his face? Is he trying to look the Dajjal, aka False Messiah? :-)

Latest report on prices:[sortAscending]=true&search[sortBy]=UNIT_PRICE

The floor price is currently 0.21 ETH ($255), down from 0.49 ETH ($578 USD). At one point it was at 0.57 ETH ($680). It remains significantly higher than $99.

b said...

FWIW I counted 11 positions for Trump's hands on the cards. The rarest one seems to be the one with the eyebeams.