A recently released study found that a number of NFTs have been trying to drive up token prices through self-dealing, exposing a legal gray space in this burgeoning market.

On Wednesday, blockchain analysis firm Chainanalysis released a report documenting their investigation into NFTs, or non-fungible tokens, market which led them to discover a number of holders were engaging in “wash trade” to manipulate the price of their tokens.

In a wash trade, a seller investor simultaneously sells and buys the same financial instruments to create misleading activity within a market. This can register from the outside as high demand, but it is done only to boost the value of the asset being sent back and forth.

According to the Chainanalysis report, it identified and tracked NFTs that were sold back and forth at least 25 times by the same handful of cryptocurrency wallets. Of the 110 most profitable cases they detected, the value of the trades was found to be nearly $8.9 million. In one case, a single wash trader executed 830 sales of the same NFT between accounts they owned.

In a second troubling discovery, Chainanalysis identified instances where NFTs were being used as part of money laundering operations, including by sanctioned actors. In the third quarter of 2021, the team recorded over $1 million in NFT transactions by illicit addresses and this number grew to $1.4 million by the end of the fourth quarter. Some of these accounts, it said, were linked to entities sanctioned by the U.S Treasury Department.

The NFT market has boomed in recent years as the tokens continue to draw more attention from companies and celebrities alike. Like other forms of cryptocurrency, NFTs are now being abused in financial crimes but unlike other crypto assets such as bitcoin, it has exposed a legal gray space that makes addressing its abuse harder.

"NFT wash trading exists in a murky legal area," the authors of the report wrote. They point out that wash trading is considered illegal in traditional securities markets, but no laws or regulations currently exist to police it in the NFT market. To address this, they suggest NFT markets do more to identify and discourage this activity on their platforms to create fairer marketplaces.

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