Two defendants have been charged with conspiracy to commit wire fraud and conspiracy to commit money laundering in connection to a non-fungible token (NFT) scheme, according to a Thursday (March 24) press release from the Department of Justice.
The million-dollar scheme defrauded those who bought certain NFTs, advertised as “Frosties.”
The defendants, Ethan Nguyen and Andre Llacuna, were charged with not providing the benefits to those who purchased Frosties NFTs, as the pair reportedly transferred the scheme’s crypto proceeds to various crypto wallets they controlled personally.
The release noted that before their arrests, the defendants had allegedly been readying a second launch of NFTs advertised as “Embers,” which would have garnered around $1.5 million in crypto proceeds.
“NFTs have been around for several years, but recently mainstream interest has skyrocketed,” Damian Williams, the U.S. Attorney for the Southern District of New York, said in the release. “Where there is money to be made, fraudsters will look for ways to steal it.
“As we allege, Mr. Nguyen and Mr. Llacuna promised investors the benefits of the Frosties NFTs, but when it sold out, they pulled the rug out from under the victims, almost immediately shutting down the website and transferring the money. Our job as prosecutors and law enforcement is to protect investors from swindlers looking for a payday.”
The release continued that the defendants had conducted a “rug pull” scheme, referring to a scenario where the creator of an NFT or project solicits investments and then abandons the project, fraudulently keeping the money they got.
The Frosties site claimed that purchasers would be eligible for holder rewards like giveaways, early game access and more. However, in reality, Nguyen and Llacuna allegedly abandoned the project within hours after selling out of the NFTs, and then deactivated the site and transferred over $1 million in crypto proceeds.
Related: CFTC Charges 4 in $44M Bitcoin Scam
PYMNTS wrote that crypto schemes have been happening with some regularity, with the Commodity Futures Trading Commission recently filing a federal civil enforcement action against four men who allegedly conducted a $44 million bitcoin Ponzi scheme, where they fraudulently solicited that much from investors, misappropriating millions of dollars.
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