The UK's tax body seized three non-fungible tokens (NFTs) and arrested three people on suspicion of attempting to defraud it of £1.4 million.
This is a first for British authorities in the policing of digital assets. The Telegraph was first to report the news.
HM Revenue and Customs (HMRC) said the move was part of a probe into a suspected Value Added Tax (VAT) fraud involving 250 alleged fake companies. VAT is a broadly based consumption tax assessed on the value added to goods and services.
The NFTs were seized alongside £5,000 of other crypto assets. Officials said that the seizure was a "warning to anyone who thinks they can use crypto assets to hide money."
The tax body added that the suspects had used a raft of measures to cover their tracks, including pre-paid mobile phones, false addresses and invoices, VPNs and stolen identities.
Authorities around the world are on high alert about the potential for dodgy dealings involving NFTs. Earlier this month, the Treasury Department in the US released a report describing how the NFT art market fits into money laundering schemes.
While NFTs may be used in financial crimes, the blockchain analysis firm Chainalysis reported recently that the amount of illicit funds laundered through them remains relatively small compared to total crypto-based financial crime.
Illicit wallet addresses sent about $1.4 million to NFT marketplaces in Q4 2021 (the largest amount of all quarters last year) whereas an estimated $8.6 billion of cryptocurrency was used to launder funds in all of 2021.