NFT, Facebook could add support in its Novi digital wallet

NFT, Facebook could add support in its Novi digital wallet


Facebook's digital wallet, Novi, has yet to be launched and will coincide with the launch of Diem, the stable digital currency that Facebook created in 2019, but the Menlo Park giant is still considering adding support for NFTs.

The stable coin is a digital currency backed by a fiat currency such as the US dollar. The launch of Facebook's stable coin, Diem, would provide crypto trading opportunities and an environment in which NFTs would be supported. Facebook Financial, also known as F2, is the internal group that develops the company's Novi digital wallet. A digital wallet is a software service that allows you to pay and receive digital currencies. Facilitates cryptocurrency trading and stores various other items such as gift cards and entertainment tickets.

The digital wallet and trading potential of its related Facebook-branded stablecoin have generated regulatory concerns in the US Congress. Facebook was able to change the tables quickly, as congressional pressure prompted the company to move from its initial Libra cryptocurrency concept to a new stable coin called Diem.

The use of a stable currency backed by a fiat currency like the US dollar could avoid the volatility of other cryptocurrencies like Bitcoin and Ether. The Diem networks will register with the US Treasury Department and its financial crime network. The Diem network would also provide access to peer-to-peer payments and the ability to purchase goods and services on Facebook's platforms, although the platform would also be open to other wallets.

Facebook wants to use its platform to facilitate the creation, purchase and sale of non-fungible tokens. A non-fungible token (NFT) is a piece of data or programming code stored on a digital ledger, called a blockchain. The blockchain is a ledger that keeps track of transactions and has them certified by a proof of work or proof of stake.

Tory Lanez Released an ‘NFT Album,’ and Then Things Got Extra Weird

tory-lanez-nft-2-feature - Credit: Photo Illustration by Griffin Lotz. Photograph in illustration by Jason Koerner/Getty Images

Rapper Tory Lanez, who seems like he could potentially reach a deal in his felony assault case after allegedly shooting Megan Thee Stallion in the foot last year, has been busy becoming an online entrepreneur of sorts. Prior to clearing his Instagram page ahead of his upcoming LP Alone at Prom, Lanez pushed various crypto and NFT businesses on social media with the vigor of CNBC’s Jim Cramer. In videos, he’d all but scream at fans, assuring them the products he was promoting were the opportunity of a lifetime. Even on text-driven Twitter, his level of intensity was consistent, he’d often post in all-caps.

Last month, Lanez partnered with a platform called E-NFT to release his new album When It’s Dark as an NFT, or “non-fungible token.” The idea was for each copy of the album to be minted with a one-of-a-kind token, providing a fool-proof ledger of ownership. The value of NFTs comes from their verifiable scarcity. Even if, as some detractors of the technology point out, someone is able to copy a digital file, the blockchain certifies its origins. Similarly, the idea was for Lanez’s NFT album to appreciate in value once it became available to resell on the E-NFT marketplace. On the day of the launch, Lanez posted a video to Twitter saying that the album sold one million copies in under a minute and that one of his NFTs had already been flipped for $50,000.

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On Reddit and Twitter, dozens have complained that glitches and inconsistencies in the platform have made selling the NFT difficult, leaving a number of customers who bought the project in hopes of selling for a profit holding the bag. There are even homespun YouTube videos outlining fans’ frustrations with their purchase.

Anthonio Vasquez, an NFT artist known as Frag, says he purchased 10 copies during the NFT’s presale period for a total of $10. The 27-year-old crypto enthusiast says that while the process seemed normal at first, things started “to roll downhill” as soon as the album’s marketplace opened up. For one, the site immediately crashed, and Vasquez says it took more than 24 hours to fully come back online. It was at that point that he discovered other discrepancies. In a Twitter DM, he said that none of the other websites where he’s bought and traded NFTs charge 15% on every sale, “only this website that was promoted by Tory.”

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Vasquez took Lanez to task on Twitter, saying that the fees associated with transactions alone make profiting from the NFT seem unlikely. Lanez responded to the Tweet saying, ​​“plenty of people made WAY more return than invested … but even if I was taking what your [sic] saying serious … The NFT sold for 1 dollar .. even if it resold for only 2$ U still would DOUBLE your $” He then added two clown face emojis to the end of the tweet.

Vasquez still disagrees. “Not true at all because with gas fees as well as the 15% going to E-NFT, you would barely walk away with 50 cents,” he says. The “gas fee” he mentions is a charge associated with Ethereum transactions, which account for the computing power required to mine the currency. Gas fees typically change throughout the day, depending on the volume of transactions on the blockchain at the time. Vasquez says E-NFT charged an additional 15% for seller transactions.

Lanez did not respond to multiple requests for comment.

In a statement to Rolling Stone, Brian McFadden, the Chief Strategy Officer of E-NFT’s parent company, says that all of the technical issues have been resolved. “Due to the unprecedented volume of the E-NFTs transactions there were some minor and short-term site functionality issues but all known transactional issues are now fixed.”

When another buyer, Bianca “Binx” Petruzzella, first heard about the album, she was intrigued on a professional level. As a co-owner of the New York-based NFT agency Third Planet Studio, the 43-year-old entrepreneur wanted to see if the platform Lanez used for the release could be a fit for her artists. She says she purchased 10 copies of the album at $1 each. “We purchased multiple albums during presale to see what features they offer, and if this was a platform we would consider using for our own musicians,” she tells Rolling Stone over email.

Petruzzella says that after the site’s initial crash was fixed, she tested selling the album for $1,000 on the marketplace since the $50,000 figure she’d seen on social media “seemed like a long shot.” After following the site’s instructions, she says she initially didn’t receive any confirmation and the browser window simply went blank. Then, three hours later, Petruzzella received an email from E-NFT saying that the NFT had, in fact, sold and the funds, in the cryptocurrency Ethereum, were settled. The asset was then removed from her collection. She has yet to receive any payment.

While E-NFT’s terms do stipulate a processing period of up to 30 days for seller transactions, Petruzzella has now been waiting for over a month to either receive funds from the sale or have the NFT returned. Her attempts at contacting customer service, she says, have been unsuccessful. “The only response we receive is the same auto-generated email that someone will get back to us,” she says.

According to Catherine Zhu, special counsel at Foley & Lardner LLP, and a member of the law firm’s NFT Task Force, that 30-day processing period is not typical of NFT releases. “If you go on any of the other platforms, the transfer of funds should be fairly quick, if not the same day,” she explained over the phone. “Usually the way that it’s done is through a smart contract. It’s the rewriting of the record on the blockchain. So there is not a processing period that the company takes on top of that. I would say that’s pretty unusual.”

McFadden says the processing times are due to the fact that they don’t only accept crypto for payments. “Because Emmersive offers credit card transactions for the primary and resale market, not all monetary transactions happen on the blockchain,” he says.

But the issues didn’t stop at prolonged waiting periods. Right after her NFT sale seemingly went through, Petruzzella says she tried a separate test. This time, she attempted to withdraw two of her NFTs from the platform into her personal crypto wallet. She says she eventually received confirmation that the NFTs had successfully been transferred. Except, they still haven’t landed in her crypto wallet.

McFadden says that users can in fact withdraw NFT purchases to their crypto wallets, and can see them on the blockchain in realtime using Polyscan, which maintains a record of blockchain transactions. Petruzzella notes that she has recently noticed a page on her account showing a link to the withdrawn tokens’ Polyscan record. However, when she clicked on the link, it took her back to the page for Lanez’s NFT. “The one we sold disappeared along with the ones we withdrew. No contract addresses for them are provided,” Petruzzella says.

In addition to withdrawal and transactions issues, Vasquez says he noticed irregularities in the structure of the market itself. “When other NFT collections drop they usually have a limit on transactions, preventing hoarding and allowing more people to interact with the NFT, to build the community of said project,” he said. Without those limits, Vasquez notes, people who bought hundreds of copies of the album have been able to flood the marketplace and could essentially manipulate the price.

A look at E-NFT’s listings for When It’s Dark does in fact show thousands of available NFTs for anywhere from $15 down to $1.10 from a handful of different sellers. McFadden says that only verified users can make transactions on the site. “There are large quantity buyers, but all are verified people,” he says.

Ultimately, for Vazquez, Petruzzella, and others who bought Lanez’s NFT, the problems center around a few dollars, but Petruzzella for one isn’t ready to give up. “A lot of people are just taking it as a loss and moving on,” she says. “But I run a company in this business. This is not OK.” She says she’s still waiting on a response from the platform’s support team.

And when Rolling Stone looked into the backbone of Lanez’s NFT release, the platform’s corporate lineage raised more questions than it answered.

Strange Bedfellows

According to the press release for his NFT, Lanez was an early equity holder of the company behind the E-NFT platform, Emmersive Entertainment. Public records show a history of inscrutable corporate maneuvers by the parties involved with that business. Emmersive Entertainment, whose corporate name is EVNT Platform LLC, is a subsidiary of Pennsylvania-based Vinco Ventures. That company has been traded on the New York Stock Exchange exchange under at least four names since it was incorporated in July of 2017 (under the name Idea Lab X Products Inc).

And a few dubious characters have been involved with Vinco Ventures. A former member of the company’s board was arrested in July on charges including embezzlement, conspiracy, and fraud in connection with another company called FTE Networks, Inc. According to an SEC filing, FTE purchased a business founded by the current Vinco CEO, Chris Ferguson, in 2013, and subsequently added him to FTE’s board in 2016.

Meanwhile, Vinco recently announced that it would engage in a “reverse triangular merger” with ex-MoviePass chairman Ted Farnsworth’s new business, Zash Global Media. The deal hinged on Zash’s acquisition of a TikTok-style app from Singapore called Lomotif, which Farnsworth claims is valued between $4 and $5 billion. It is worth noting that just last December, Farnsworth and his former MoviePass partners agreed to settle claims brought by the Federal Trade Commission including charges that they misled investors on the profitability of the MoviePass service. Furthermore, according to an investigation published in the Miami Herald, Farnsworth and his businesses have faced several lawsuits going back to the early 2000s.

(Neither those lawsuits nor the former Vinco board member’s arrest involved Ferguson, E-NFT, or Tory Lanez.)

Now, it appears that Zash and Vinco are set on both music and NFTs. In the press release for Lanez’s NFT album, they explain the connection between Lomotif, E-NFT, and Lanez: “There are very few people on Earth with [Lanez’s] gift. When you combine that talent and vision with the marketing power that Vinco can access through Lomotif, it’s a clear winner. With tens of millions of active users we can market our proprietary E-NFT’s to a targeted audience not only nationwide but worldwide as well.”

And Vinco recently announced plans to spin off its NFT business into yet another publicly traded company called Cryptyde. Despite ongoing customer complaints about E-NFT across social media, the company continues to herald Lanez’s album release as a success story. The “first album in history to reach Platinum on the blockchain,” according to Vinco’s latest investor presentation.

It does make sense that Lanez would want to get into crypto. There’s been a distinct rise in the discourse around potential applications for the blockchain technology that undergirds cryptocurrencies and NFTs. And the latter does in fact have promising applications within the music industry. Zhu explains that while the current boom in NFTs is introducing more established brands and celebrities into the market, they should proceed with caution when choosing a platform to partner with. “There are a lot of choices when they’re trying to do these NFT launches, so when they’re figuring out who they’re partnering with, making sure that it’s not going to be bad for them from a publicity standpoint,” she says. “There’s a risk to their brands because they have a very visible profile.”

Hip-Hop’s Would-Be Crypto Don?

When it comes to Tory Lanez’s NFT album, the stakes aren’t terribly high for any given buyer. The album sold for a dollar upon its release and, despite a buggy website and some perhaps inflated claims about its investment potential, it isn’t as if anyone is claiming to have lost their life savings à la Bernie Madoff. But Lanez’s style of promotion does go beyond what you typically see from celebrities when it comes to promoting a product or service. The rapper has around two million followers on Twitter, which puts any endorsement he makes under a specific type of scrutiny. Influencers, for example, have to disclose whether or not they are being paid by a brand they post about, per FTC guidelines. In 2018, Tesla CEO Elon Musk agreed to pay a $40 million penalty after the SEC sued him for securities fraud. The case came about because of Musk’s tweets about a potential buyout of his company, which in turn sent the company’s stock price soaring.

(To Rolling Stone’s knowledge, Lanez was not paid for his posts about E-NFT.)

Vasquez says he’s troubled by Lanez’s habit of promotion in part because of what seem like inconsistencies in the products he advocates for. “You can see from his socials he has now shifted to multiple other cryptocurrencies that cannot even be used to purchase his own NFT album,” he says. Vasquez points to Lanez’s regular posts about the cryptocurrency Boostcoin. Up until a few months ago, Lanez was ardently posting about Boostcoin’s competitor UniSwap.

Still, Crypto platforms remain murky territory when it comes to legal guidelines. A major question is whether or not a celebrity like Lanez telling their followers that an NFT is re-selling for thousands of dollars is tantamount to investment advice. According to Zhu, he could potentially be running afoul of the Securities and Exchange Commission. “There’s a four-part test called the Howey test that’s applied to determine if a product is going to be considered a security,” Zhu explains. “That includes an expectation of profits for the enterprise.”

The so-called “Howey Test” comes from a 1946 Supreme Court case that set a precedent for what kinds of transactions are subject to requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934. According to the ruling, an investment contract exists if there is an “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”

The Howey Test offers the framework for a 2019 report from the SEC’s Strategic Hub for Innovation and Financial Technology on digital assets. In an adaption for the burgeoning market for new technologies, the SEC determined that a digital asset should be considered a security if “a purchaser may expect to realize a return through participating in distributions or through other methods of realizing appreciation on the asset, such as selling at a gain in a secondary market.”

Zhu offers up simpler terms. “From a practical standpoint. If you’re putting an NFT out there so it looks like it can be traded, and that it appreciates in value, then it could be considered security and would need to be registered,” she says. “If he’s hyping up the value on social media, that could fall within what is considered a security.”

A representative for the SEC did not return our request for comment.

In recent months, regulatory interest in blockchain technologies has reached a fever pitch. In September, the SEC brought a case against the online crypto lending platform BitConnect, claiming they managed to amass $2 billion from investors “through a global fraudulent and unregistered offering of investments into a program involving digital assets.” The SEC’s case alleges that BitConnect promised exorbitant returns from their platform but in reality “siphoned investors’ funds off for their own benefit by transferring those funds to digital wallet addresses controlled by them.” The case also involves a handful of promoters who, the SEC claims, were rewarded for amplifying the brand with commissions. BitConnect denies any wrongdoing.

(There is currently no indication of any SEC or other investigations into Lanez, Vinco Ventures, Zash Global, or any related individuals or entities.)

For now, Lanez appears to be taking a break from the crypto world altogether. Last week, he mysteriously erased all of his Instagram photos and posted a cryptic Tweet to his fans: “It’s been real.” It was likely a promotional effort for his new LP Alone At Prom, due for release in December.

Before going dark, however, Lanez was heavily promoting a new product, the Fancy Frenchies NFT, a digital french bulldog avatar available on the Solana platform. According to the company’s website, a portion of the sales of the NFT will be “donated to a dog charity that is chosen by our great Fancy Frenchies community!” In one of Lanez’s last video posts on Twitter, he says they sold out in three minutes.

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