Jonathan Mann, known for his "Song A Day" project, earned approximately $3 million by selling his back catalog as NFTs, primarily denominated in Ethereum (ETH). However, the 2022 crypto market crash, triggered in part by the Terra (LUNA) ecosystem collapse, dramatically reduced the value of his crypto holdings.
Mann faced a significant tax burden because the IRS taxes NFT sales as income based on the crypto's value at the time of sale, not its decreased value after the crash. Despite the loss in ETH value, his tax bill remained high, resulting in a financial strain that led him to sell a rare Autoglyph NFT for $1.1 million to pay the IRS.
Additionally, Mann had taken out a loan from the Aave lending protocol using ETH as collateral, which was liquidated during the market downturn causing further losses. The incident highlights the volatility and tax challenges faced by NFT creators and crypto investors.
Despite these setbacks, Mann continues to create and sell NFTs, optimistic about future earnings, while the experience sparks discussions about the need for better strategies such as stablecoin use or diversification to mitigate such risks.