Two men face 20 years in prison over $1.1 million NFT rug pull scam

[midian182]

What just happened? Another day, another NFT scam; this time it's of the rug pull variety. Two men have been charged with conspiracy to commit wire fraud and money laundering after they made $1.1 million from a non-fungible token project before abandoning it without fulfilling any of the promises they made and leaving buyers with nothing to show for their investments.

The Department of Justice is charging 20-year-olds Ethan Nguyen and Andre Llacuna for allegedly running the Frosties NFT project, which saw its 8,888 NFTs, each priced at around $180, sell out within an hour of their public launch.

🚨Breaking🚨

Frosties NFT Project rugpulled, causes millions in losses to the investors ❌

This is the first known NFT scam of the year. Investors have reportedly lost $1.3 million🤯#Whalecointalk #CryptocurrencyNews #Rugpull #Frosties #Opensea pic.twitter.com/17jNb4rX8Q

— Whale Coin Talk 🐳 (@WhaleCoinTalk) January 13, 2022

Like similar NFT collections, buyers were promised rewards such as a "metaverse" game, giveaways, 3D versions of their avatars, etc. There was also the potential to make a lot of money by reselling their NFTs at a higher price.

Frosties on OpenSea

But soon after the initial sale was complete, all trace of the Frosties project vanished from the internet, including the Discord server, and buyers found they could only get a few dollars from the sale of their NFTs.

The criminal complaint against the pair includes what appears to be an apology from Nguyen to one of the server's mods. "I know this is shocking, but this project is coming to an end. I never intended to keep the project going, and I don't have a plan for anything in the future," it reads. The mod was also sent some Ethereum for their troubles, and Nguyen recommended that they delete their Discord account to avoid any heat from angry project investors.

Prosecutors say Nguyen and Llacuna transferred around $1.1 million in crypto they made from the scheme to various wallets in multiple transactions designed to obfuscate the source of the funds.

That's usually where the story ends, but it seems the pair were emboldened by their success. They put together a follow-up series of NFTs called Embers that was supposed to launch in March. There was even a roadmap that promised $50,000 would be donated to the Red Cross, which the charity says it did receive, and that 25% of the funds from the mint would go into a community-controlled wallet. Investigators say this would have been another rug pull scheme and that it could have earned an extra $1.5 million.

The Verge writes that investigators were able to match Nguyen and Llacuna's Discord account data, including the former's IP address and the latter's email address and phone number, with corresponding accounts on Coinbase. These accounts on the crypto exchange were linked to a Citibank credit card and government ID that enabled authorities to track them down, and both men now face up to 20 years in prison.

Permalink to story.

https://www.techspot.com/news/93924-two-men-face-20-years-prison-over-11.html

 

[brucek]

This is why I only buy NFTs backed by real assets such as clip art of a rock.

Not that I have any sympathy for these two fraudsters but the line between what they did and the legal NFTs feels pretty thin to me. They probably could've done less work for a more legal way of selling the same 8,888 Frosties.

 

[emmzo]

This is the kind of fraud I really don't care about the victims.

 

[StrikerRocket]

This is the kind of fraud I really don't care about the victims.

For sure, I struggle to think of something more useless than NFTs...
I can't imagine spending a single cent on such things... Baffles me...

 

[QuantumPhysics]

All NFT is a scam, fraud and Ponzi schemes.

The SEC and IRS need to step in.

 

[Nobina]

NFTs are a good way to evaluate a person. People involved with it are "get rich quick" type of people who usually are shady to do business with. People buying NFTs are likely very stupid and arguably deserve what's coming to 'em. And I'm just a ****.

 

[Dimitriid]

Actually to me at least, the interesting part is that these guy did a terrible job at creating an exit strategy and were super lazy: transferring to wallets they directly tied to coinbase to cash out and then trying it again, same accounts. That's just supremely bad.

The reality is that most NFT rug pulls will never be caught: cashing out of the system is the only reason they got caught but they really didn't need to: they could have just use socks to hold the ETH and then have legitimate accounts get that Eth during even a minor dip in Eth: something anybody holding Eth would do and then find other ways to pump up Eth as a whole or wait for a more favorable time to actually cash out via a coin base or better yet, some other sucker that tried to save on gas fees and other stuff and would allow you to cash out your legit Eth during one such craze.

I guarantee they would haven't been able to trace it back to the rug pull because well how many rug pullers do you ever see getting caught? That's right most are not this stupid and eager to not only cash out but basically return for another round with the exact same set of coinbase accounts: that'd be like a murderer bringing a brand new victim to the exact same crime scene after he knows it's already being investigated by police.

 

[Neatfeatguy]

"...without fulfilling any of the promises they made and leaving buyers with nothing to show for their investments."

Doesn't this comment describe the actual idea behind NFTs? You physically have nothing to show for your investment....

Give me money. I'll write down that you paid me X amount on Y date for Z item that you don't actually get. I'll send you a picture of Z item and store the receipt in a drawer that no one else knows about and keep X money. You can proudly go around showing people a picture of Z item.....a picture.....a digital picture. You have nothing tangible in return after giving me your money.

 

[Uncle Al]

Sounds a bit too much like garbage chasing garbage but I'm no artist and I'm starting to think they aren't either! LOL

 

[RudyBob]

Ralph Kramden just went broke

 

[Lew Zealand]

So...

NFTs exist so suckers can buy crap they somehow think will sell for more money to even bigger suckers before the NFT issuers pull the rug and split with your real, actual money.


Frankly I prefer my chances at a Vegas poker table, and I suck at poker.

 

[mrvco]

Wow, 20 years for duping NFTpeople out of $180? Sure, it's a crime and should be prosecuted, but there are convicted murderers sentenced to less time.

 

[MyIOnU]

NFT is money laundering service. Everyone involved should be arrested.

 

[erickmendes]

I'm selling 5 NFTs. Each one just 1000 Bitcoin. You can sell it for 2000 bitcoin each.

 

[captaincranky]

I'm selling 5 NFTs. Each one just 1000 Bitcoin. You can sell it for 2000 bitcoin each.

Would you take a thousand rubles?

 

[Puiu]

Wow, 20 years for duping NFTpeople out of $180? Sure, it's a crime and should be prosecuted, but there are convicted murderers sentenced to less time.

"Nguyen and Llacuna transferred around $1.1 million in crypto they made from the scheme."

 

[captaincranky]

Wow, 20 years for duping NFTpeople out of $180? Sure, it's a crime and should be prosecuted, but there are convicted murderers sentenced to less time.

Yeah well, people are always whimpering about the lack of time given to "white collar criminals", while "people of color" get heavy sentences for "harmlessly" dealing a few hundred bags of smack.

I think it's well past time for the scales of justice to balance themselves out, and give these a**holes their "just desserts". Lock these thieves and con men up forever for all I care.

 

[Theinsanegamer]

NFTs are a total scam, hell almost the whole crypto market is full of scammers. The more these screwballs are held to the law the better, the entire unregulated securities trade needs to be reigned in before it triggers another 2008.

Wow, 20 years for duping NFTpeople out of $180? Sure, it's a crime and should be prosecuted, but there are convicted murderers sentenced to less time.

It's $1.1 million, not $180. And IMO its not hard enough, the NFT space is a goldmine for scammers and theives. There needs to be some hard deterrent for these people to get the message.

Also, it's "up to" 20 years, not guaranteed 20 years.

"...without fulfilling any of the promises they made and leaving buyers with nothing to show for their investments."

Doesn't this comment describe the actual idea behind NFTs? You physically have nothing to show for your investment....

Give me money. I'll write down that you paid me X amount on Y date for Z item that you don't actually get. I'll send you a picture of Z item and store the receipt in a drawer that no one else knows about and keep X money. You can proudly go around showing people a picture of Z item.....a picture.....a digital picture. You have nothing tangible in return after giving me your money.

Well yeah, they're basically getting arrested for selling NFTs.

Good. Hopefully it sinks the whole NFT market.

 

[Aaron Fox]

Regardless of the details, it is true that people routinely get harsher sentences for things like hacking a corporate website versus murdering ordinary people.

Corporations aren't just people (according to Romney and the people like him who run the circus) — they're super people. Better not upset them by defacing their website!

By comparison, in the 90s a gay man in Tennessee was murdered and the man who did it didn't even have to say why he did it. All his defense team had to do is say the murdered guy was a 'gay activist' and that was enough. He didn't serve a day of time.

 

[bviktor]

NFT is a "solution" looking for a problem. Tech that's made 100% for scams. There's literally ZERO value behind it. Nada. A complete waste of energy, time, and money.