Two men arrested for $1.1 million NFT ‘rug pull’ scam

    What really happened?

    Two individuals have been charged with fraud and money laundering in connection with a bitcoin “rug pull” operation. Ethan Nguyen and Andre Llacuna are accused of earning $1.1 million by selling non-fungible tokens (or NFTs) based on “Frosties,” a cartoon-like character. They shut down the initiative and shifted its cash to a variety of separate crypto wallets after selling the NFTs, leaving Frosties owners without the promised benefits.

    The Internal Revenue Service, Criminal Investigation (IRS-CI), and Homeland Security Investigations (HSI), according to the criminal complaint, began investigating Frosties in January, immediately after receiving complaints about the scam. Frosties was a popular initiative, with 8,888 NFTs (equal to $130 in Ethereum) selling out within an hour of its public introduction.

    However, as Protocol documents, the developers abandoned it practically immediately. When buyers tried to resell their NFTs, they only received a few bucks, and they gave up all prospects of seeing future promised benefits, such as 3D copies of their avatars and a Frosties video game. (However, some con artists in the community sought to resuscitate the Frosties as a different NFT lineup.) Frosties’ two perpetrators have since been apprehended in Los Angeles, California.

    The complaint

    Nguyen appears to have apologized and confessed to the administrator of the Frosties community Discord server in the complaint. “I know it’s hard to believe, but this project is drawing to a close. It reads, “I never planned to keep the project running, and I have no plans for the future.” Nguyen also handed the moderator some Ethereum “for your difficulties” and advises them to delete their Discord account, according to the message. “I want you to know that I am concerned about you. It concludes, “I appreciate you, even if you don’t appreciate me.”

    The Frosties producers were allegedly confident enough to create a follow-up series named “Embers,” which was set to premiere later in March. While the Red Cross acknowledged receiving the $50,000 payment, Embers’ roadmap featured a community-controlled wallet that would store a quarter of the initial sales funds — and while the former promise appears to be significantly more doubtful.

    Investigators matched Nguyen and Llacuna’s Discord account data (including Nguyen’s IP address and Llacuna’s email address and phone number) with corresponding Coinbase cryptocurrency trading accounts, among other details. Law enforcement was able to trace the couple down since their Coinbase accounts were linked to a Citibank credit card and a government ID. Investigators then discovered a sequence of transfers in which Nguyen and Llacuna reportedly attempted to conceal where the Frosties funds were being sent, leading to the money laundering charges.

    What are crypto “rug pull” schemes?

    Although crypto “rug pull” techniques are very popular, criminal trials are significantly less so. For one thing, the creators of the NFT series rarely divulge their legal names—until recently, even the creators of the ultra-expensive Bored Ape Yacht Club series stayed anonymous. Furthermore, profitable NFT series launches are a recent phenomenon. Furthermore, the legal position of NFTs, in general, can be a bit hazy.

    However, the Justice Department’s press release is unequivocal in branding Frosties a con. In a statement, IRS-CI Special Agent-in-Charge Thomas Fattorusso said, “NFTs represent a new age for financial investments, but the same laws apply to an investment in an NFT or a real estate development.” “You can’t raise money for a business opportunity, then dump it and disappear with the money your investors gave you.” In any case, you shouldn’t admit to it on Discord if you’re going to do it.

    Stay in the Loop

    Get the daily email from CryptoNews that makes reading the news actually enjoyable. Join our mailing list to stay in the loop to stay informed, for free.

    Latest stories

    You might also like...