NFT scammers see an opportunity in Ukraine donations

The Ukrainian government and celebrities have promoted non-fungible tokens (NFTs) and cryptocurrencies to raise money for the country’s military during the ongoing war with Russia.

Although the tactic has proven effective – in the first five weeks of the war, Ukraine received more than $ 135 million in cryptocurrency donations – it is a disadvantage. Like much of the cryptocurrency industry, donation campaigns for Ukraine are full of scams and frauds, according to researchers.

On Tuesday, the Ukrainian open source intelligence company Molfar published a study describing how a company called ZelenskiyNFT sold Ukrainian-themed NFTs allegedly to help the military and refugees, but instead appeared to have pocketed the money.

The co-founders of ZelenskiyNFT denied the allegations, calling the investigation “absurd.” The Record reached out to the organization through the Telegram messaging app – an adviser using the pseudonym “Twain” for security reasons said that “all proceeds from the NFT sale were transferred to charities.”

“We are very transparent,” he added, but gave no further details.

Some of the charities look suspicious, according to Molfar: they were created between March and May this year, they have a handful of followers on Facebook, and there is no information about their founders or total donations collected. Their social media accounts appear to be being tracked by robots, Molfar found.

Other Ukrainian charities listed by ZelenskiyNFT told The Record that they did not receive any money from the group. Only one organization confirmed that it received 1.18 ETH (approximately $ 1,300) from ZelenskiyNFT.

A mysterious company

Behind the ZelenskiyNFT project is the little-known studio IamUkraine. Molfar’s investigators said they could not find the company in any existing company registers. Publicly, however, the project claims that it works with leading start-ups and Fortune 500 companies.

Everything that is known about the company’s employees and owners is names and digital avatars created with the free app ZEPETO.

The ZelenskiyNFT collection – traded on the NFT marketplace OpenSea – consists of more than 9,500 works of art, each representing Ukrainian President Volodymyr Zelensky in various personas – Hulk, Doctor Strange, Ninja Turtle, Iron Man. An NFT costs about $ 276.

Molfar’s OSINT survey found that Twain is a Russian citizen, and his co-founders – Dzmitry and Volodymyr – are Belarusian and Ukrainian, respectively. Most of the team now lives in the Czech Republic, but was born in Russia, according to Molfar.

“The team has people from Russia,” Twain confirmed to The Record. “And the fact that they are the ones who care among Russians just deserves respect.”

Twain did not say how much money the charities received from ZelenskiyNFT. The employees of Ukrainian Balu Charity and Tabletochki told The Record that they discussed a possible partnership with ZelenskiyNFT, but that they have not received any funds.

A spokeswoman for Donor.ua told The Record that the organization received around $ 1,300 in Ethereum from ZelenskiyNFT, but the transaction was not easy.

A representative of a charity called the People’s Coalition told The Record that his fund has received “hundreds of thousands of dollars” from ZelenskiyNFT since March 2022, although NFTs from the group only began trading in June.

The spokesman also asked The Record to write “only good things” about the project because “it gives a lot of money” to his organization. He refused to specify the number or what is the cause of charities.

There are other signs that point to an alleged fraud, according to Molfar. The company’s Twitter account, for example, has 17,000 followers, most of whom appear to be robots. Instagram has only 13 followers.

The company also paid for its advertising in Ukrainian and foreign media – there is no organic mention of it on the internet, Molfar found.

In addition, ZelenskiyNFT does not cooperate with local authorities, such as the state-funded NFT Museum, which sells digital art to raise money for Ukraine. Its spokeswoman, Valeria Panina, told The Record that she “heard that this project is a scam.”

What’s next for NFTs

Fraud is widespread in the NFT market. In February, OpenSea users lost $ 1.7 million in NFTs in a phishing attack; Nearly $ 2.9 million was stolen when the Bored Ape Yacht Club’s Instagram account was compromised.

And as NFTs have become more common in philanthropy, scammers have also jumped in. The creators of the NFT project Doodled Dragons, for example, promised to donate all proceeds to charity, but took all the money and ran.

There are several charitable NFT projects in Ukraine in addition to the NFT Museum, such as Avatars for Ukraine. These projects are supported by the government and are transparent about the total amount collected and how they will spend them.

“It is easy to fall victim to cryptocurrency fraud in Ukraine these days,” Artfar Starosiek, CEO of Molfar, told The Record. “People are so eager to help their country that they rarely engage in critical thinking.”

On July 6, Starosiek told The Record that Molfar had reported ZelenskiyNFT as fraudulent content on OpenSea and submitted a complaint to the Czech cyber police as well as Ukrainian law enforcement.