The U.S. Department of Justice (DoJ) has charged two men with fraud for orchestrating a $1.3 million rug pull involving non-fungible tokens (NFTs). The two sold close to 9,000 NFTs, known as Frosties and within hours, vanished with the investors’ ETH.
Ethan Nguyen and Andre Llacuna launched Frosties in January 2021, and it got off to a great start, attracting thousands of investors the world over. The collection featured very colorful ice-cream-scoop characters with quirky outfits. Each Frosties NFT went for an average floor price of 0.04 ETH, and with 8,888 NFTs sold, the two managed to raise $1.3 million from investors, authorities said.
Nguyen and Llacuna reportedly lured investors with promises of extra quirks once they bought the NFTs, including giveaways, early access to a metaverse game they claimed to be working on, and exclusive mint passes to upcoming Frosties seasons.
However, on January 9, the two, who had disguised their names and identities to the buyers of the NFTs, reportedly vanished with the funds and deactivated the Frosties NFTs website. To obfuscate the path of the stolen funds, the suspects allegedly sent them to several different wallets under their control.
As the DoJ revealed, when authorities arrested the two, they were already at advanced stages of a second NFT project, this time named Embers. Based on similarities to the Frosties NFT project, Embers is believed to be yet another fraud scheme that was expected to launch on or around March 26 to target more unsuspecting investors.
Some of the victims revealed that they took to Frosties as they were different from most NFTs.
“I really like the art style. They looked really cute on the website. Frosties had a feeling that people would buy that, you know,” Joshua Christian, a 20-year-old from Huddersfield, England, who spent $1,000 on the NFT collection, told one outlet.
“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,” U.S. attorney Damian Williams commented.
USPIS Inspector-in-Charge Daniel B. Brubaker called on investors to be cautious when investing in NFTs, stating, “These assets may seem like a good deal or a way to become wealthy, but in many cases, as in this situation, only lead to the loss of your money.”
The two suspects have been charged with one count each of wire fraud which carries a maximum sentence of 20 years in prison. They were also charged with one count each of committing money laundering, which has a similar sentence.
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