(Bloomberg) -- Just as scrutiny has started to grow over suspicious activities on online NFT platforms, Dapper Labs Inc., the company behind the highly popular NBA Top Shot, said it is partnering with crypto-forensics firm Chainalysis to track transactions and customer activity.
Growing consumer access to crypto products requires scrutiny of the funds used to purchase non-fungible tokens -- which are known as NFTs and allow holders of art and collectibles to track ownership -- and necessitates monitoring of compliance practices to help detect and prevent money laundering and manipulation, the companies said in a press release.
“Our team at Chainalysis is preparing for a world where all types of value will flow on blockchains: art, gaming, business transactions, and other other uniquely engaging digital experiences,” Jonathan Levin, co-founder and chief strategy officer at Chainalysis, said in the statement. “We are excited to partner with a market leader in bringing the world of entertainment onto the blockchain, and look forward to helping Dapper Labs scale its compliance processes as the company pioneers new consumer use cases.”
Dapper Labs will use specific know-your-transaction tools Chainalysis offers. A product called Chainalysis KYT flags risky and illicit activity in real-time, and another, called Chainalysis Reactor, allows investigations into those transactions, the release said. These will allow Dapper Labs to track the funds being used to purchase NFTs and will help it combat criminal activity on the blockchain, the companies said.
NFTs have come under the spotlight for a practice called wash trading, where a speculator inflates activity by buying and selling among themselves. Plus, the space was embroiled in an insider-trading scandal, whereby an employee at OpenSea bought items that were later featured on the company’s home page. The incident sparked a suspicion that has long dogged the unregulated world of digital collectibles: Insiders are making huge profits off of the industry’s wild valuation swings.
In a recent interview with Bloomberg News, Roham Gharegozlou, the co-founder and chief executive officer of Dapper Labs, said on his platform, everything is transparent: every account and user is verified -- both buyers and sellers -- and there’s no ability to mix funds or hide assets. “We wanted to make sure that trust is at the core of our product experience,” he said at the time.
Meanwhile, Dapper Labs said recently it raised $250 million in its latest funding round and, at the same time, announced a deal with LaLiga to offer digital collectibles for soccer fans. Soon after, it also announced a pact with the National Football League.
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