Maybe I'm too naive, but what's NFT have to do with it? Couldn't they send any crypto instead? What does it accomplish?

I never heard of this usecase, which makes me believe it's too convoluted to be true.

If someone sends you $1M in Bitcoin out of the blue, that's very suspicious. You didn't earn that and the tax man knows it. If you make a goofy picture of a frog and someone "buys" it from you for $1M in Bitcoin, that's just the wacky world of NFTs, and the government will have a hard time proving that that wasn't a legitimate purchase.

It's not convoluted at all; it's actually pretty elegant when you get down to it. It's almost enough to make the entire NFT phenomenon make sense.

I’m pretty sure the art market was doing this all along.

If you have $200,000 in ETH, you can sell yourself a $200,000 NFT. Externally it looks like some anonymous person gave you $200,000 for an NFT, rather than you just trying to legitimize illegal cash flows.

Or alternatively, you can double your net worth, because you go from having $200,000 ETH to having $400,000 ($200,000 ETH and a $200,000 NFT). This can then be used to fool naive lenders (or buyers) to giving you money at a fraction of the amount the NFT is worth, which is still a net gain for you.

If you're buying NFTs like they're legitimate "art" and not aware that NFTs exist for these purposes, then you shouldn't be playing the NFT game.

I think you are getting this wrong

the NFT scam is a tax evasion thing - much like much of fine art.

Welp, it's basically an unregulated market, so whatever possible is possible. Tax evasion, check. Money laundering check. Ponzi scheme, check.

Art embezzlement is just an additional way NFTs are used to the ways described above.

It's an alibi. Yes you received a lot of money. But because someone loved your MS Paint masterpiece.

Sigh. I understand now...

I wonder if this could be tracked somehow. NFTs used as 'receipts' probably never get sold again.

NFT is just digital art fraud. Fine Art is often used to transport millions of dollars across borders. NFTs are `probably` used in a similar way.

We make a deal via some marketplace. Doesn't matter. We agree on a price and an amount, and some other specifics.

In a different marketplace, you offer up a jpg of a monkey. I offer thousands of dollars to own it.

In the real world, you ship me a big box full of dope, and email me a hyperlink to a jpg. I send you bitcoin, and all of a sudden, we're both legitimate actors in this little NFT art biz.