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- The two were planning to start the sale of another NFT product called Embers, which was intended to produce roughly $1.5 million in cryptocurrency profits.
- They abruptly abandoned and shut down the project within hours of selling out $1.1 million worth of NFTs.
- They might face a significant prison sentence if proven guilty, as each count carries a maximum sentence of 20 years.
You can’t raise money for a business opportunity, then quit it and disappear with the money your investors gave you, said IRS-CI special agent-in-charge Thomas Fattorusso. After charging the founders of the Frosties project with fraud and money laundering, the Department of Justice (DOJ) has taken action against an alleged non fungible token (NFT) rug pull.
Shut Down The Project Within Hours Of Selling Out $1.1 Million Worth Of NFTs
The two founders are accused of hiding their identities in order to pull a fast one on the Frosties community by failing to deliver on the project’s roadmap and utility, which promised NFT holders rewards, giveaways, access to a metaverse game, and exclusive access to future mints from the project.
Ethan Nguyen and Andre Llacuna, both 20, were arrested in Los Angeles on Thursday and charged with one count of wire fraud and one count of conspiracy to commit money laundering in connection with a million-dollar scheme to defraud purchasers of the NFTs Frosties, according to a press release from the Attorney’s Office of the Southern District of New York.
They abruptly abandoned and shut down the project within hours of selling out $1.1 million worth of NFTs, according to the DOJ’s complaint, and transferred the money to several crypto wallets under their control in many transactions meant to obscure the original source of funds.
A ‘rug pull,’ as the phrase implies, is a scenario in which the creator of an NFT and/or gaming project solicits investments before abruptly abandoning the project and fraudulently keeping the project investors’ monies, according to the announcement.
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IRS-CI special agent-in-charge Thomas Fattorusso warned in the announcement that his team is keeping a careful eye on cryptocurrency. Despite the fact that NFTs are a relatively new financial investment option, the rules apply whether you invest 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. Our staff at IRS-CI and our allies at HSI are keeping a careful eye on bitcoin transactions in the hopes of uncovering alleged schemes like this one.
Intended To Produce Roughly $1.5 Million In Cryptocurrency Profits
Prior to their detention in Los Angeles, the two were planning to start the sale of another NFT product called Embers, which was intended to produce roughly $1.5 million in cryptocurrency profits, according to the DOJ. They might face a significant prison sentence if proven guilty, as each count carries a maximum sentence of 20 years.
While it appears that a number of dubious NFT initiatives slipped by the DOJ’s notice in 2021, there is speculation that the department will increase its focus on NFTs this year through its National Cryptocurrency Enforcement Team (NCET), which was founded in October. Agents from the Internal Revenue Service’s Criminal Investigation Division (IRS-CI), the Department of Homeland Security’s New York Field Office (HSI), and the United States Postal Inspection Service investigated this case (USPIS).
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
