NFT as collateral might not be the best idea for collectors. Recently, a Mutant Ape holder lost their NFT after they failed to pay back an 11.5 ETH ($14,853) loan due to a hack.
According to the lender @gmPotatodog, the NFT holder got scammed and the attackers drained out all of the funds that they were supposed to pay back for the loan.
When they failed to pay back the money in due time, the holder lost ownership over their NFT. The MAYC automatically got listed on the marketplace and sold for 22 ETH within an hour.
Mutant Ape #10269 was initially bought for 23 ETH by the owner. Based on the current floor price of the collection, the NFT should’ve been sold at a high price but was listed for 22 ETH only.
NFT loans have become popular among collectors. Many people lend their NFTs in exchange for money for investment or other buying purposes. Although this is a good approach, it can backfire too.
Since a lot of scams and hacks are common in the NFT space, there is always a risk with taking out loans because if you fail to pay them, you will lose the valuable NFT you put as collateral.
Although some loans are regulated, there’s still a lack of proper guidelines that protect the borrower or lender. The borrower had no choice but to accept the situation because no law protects them.
So, whenever you are about to put NFTs on collateral, you have to measure the risks that come with it. Borrow responsibly.