The two 20-year-old men from Los Angeles are accused of defrauding investors out of over US$1mil by creating a series of NFTs and abandoning the project after selling out of the tokens. The two created a series of non-fungible tokens known as “Frosties,” which were supposed to grant purchasers exclusive access to giveaways, a metaverse-based game, and future seasons of NFT
The pair, however, performed a “rug pull” in January, prosecutors said, giving up on the Frosties project within hours of selling out of the tokens, deactivating the website devoted to the NFTs and transferring approximately US$1.1mil in cryptocurrency proceeds to wallets they controlled.
Andrew Llacuna and Ethan Nguyen were charged with wire fraud and conspiracy to commit money laundering by federal prosecutors in New York on Thursday.
The investigators successfully matched Nguyen and Llacuna’s Discord accounts, which include their IP addresses, e-mail addresses, and phone numbers, to their Coinbase cryptocurrency exchange accounts. The accounts were linked to a government ID and Citibank credit card that law enforcement eventually used to track them down.
Prior to their arrest, Nguyen and Llacua advertised a second NFT collection under the name Embers. This collection is similar to Frosties NFT and is scheduled to be released on March 26.
U.S. Attorney Damian Williams said that “where there is money to be made, fraudsters will look for ways to steal it”. That is certainly the case in the NFT market.
Fear of missing out has been used as a bait for scammers to cash in on investors in the NFT market. Merely in the past three months, there had been several rug pull allegations, for instance, Neonexus, Balloonsville, CryptoSis, and Blockverse just to name a few.
Hopefully, how the Frosties project turned out will discourage scammers from using NFTs. It is likely that more countries will enact stricter regulations concerning digital assets as the NFT industry grows. In spite of this, NFT enthusiasts should remain vigilant and continue to be cautious when investing in NFT projects.