Police Freeze Latvian NFT Artist’s Account – ARTnews.com

Earlier this year, Latvian generative artist Ilja Borisovs had his bank accounts frozen, and several months later Latvian police revealed they were investigating him for suspected money laundering, the artist announced last week.

Borisovs, who goes by the handle Shvembldr, became a popular NFT artist in 2021, selling mints of his generative art on NFT platforms such as Foundation, OpenSea and Art Blocks. Borisovs has said he earned 4,253 Ether from his art sales, which he converted to €8.7 million ($8.89 million) and placed in a Latvian bank account. Borisovs’ figure could not be independently confirmed ARTnews, but the artist has created a public ledger of all his NFT sales and earnings.

On July 18, Borisovs published a website Art is Crime, where he told his version of the situation: In February, he discovered that his bank accounts were frozen and his property seized, but received no notice or reason for the seizure. In May, after much back and forth with the courts, the artist was finally told that he was being investigated for money laundering and had 45 days to prove the legal origin of the millions he had deposited into his bank account.

“[Initially,] I was surprised, Borisovs said ART news in a direct message on Twitter. “But then my surprise was replaced by confusion. There was confusion that lasted for days and weeks. I waited every day for a solution to this question. I thought this was a mistake. I felt that they would talk to me, that they would cooperate, that we would resolve it as in a civilized state of law. But it didn’t turn out that way.”

According to Borisovs, a Latvian court decided to unfreeze his account on June 30, when he tried to pay over €3 million in income tax, but found that the bank refroze the assets before he could. Borisov said he remains locked in legal proceedings with the court over the funds.

Borisovs said account freezes have made it impossible for him to pay bills or taxes, and if convicted, he could face up to 12 years in prison. He said he has shared with the courts all information about his NFT and Ether transactions, including tweets and correspondence.

“I structured it all carefully and made it as understandable as possible, even for those who are not connected to generative art and NFT,” said Borisovs. Nevertheless, he is unsure of what will happen. “The court can assess the reasoning that the police ‘have suspicions’. And the police can drag it out until 2024 by using bureaucratic measures.”

Borisov’s story appears to be the first major example of a digital artist running afoul of the authorities regarding their NFT earnings. Although given that 2021 marked an explosion in the NFT market, there could be more to come. In the US, a number of states have recently announced new guidance or draft rules for the taxation and reporting of crypto and NFT sales and earnings.

“I know a large number of artists, including much more successful than me, and no one has this problem,” said Borisovs. “The second half of 2022 came and all the artists who made money in 2021 paid taxes and continued to work. They faced all sorts of problems: mistrust from conservative banks and the complexities of tax accounting and bookkeeping, but no one was prosecuted, much less police misconduct.”

The Latvian police and the Latvian State Security Service did not respond to a request for comment.