Creators of Frosties NFT Charged by Justice Department
NFT rug pulls have been running rampant in the space. These scams are made to steal money from early investors. Most have gotten away with the malicious act, but today could be a turning point for NFT scammers.
The United States Department of Justice announced today the arrest of 20-year-olds, Ethan Nguyen and Andre Llacuna, due to conspiracy to commit wire fraud and conspiracy to commit money laundering over the Frostie NFTs.
Nguyen (a.k.a. “Frostie” and other aliases) and Llacuna (“heyandre”) are the apparent masterminds behind Frosties, an Ethereum NFT project that had held its mint in January. Easily selling through the 8,888 NFTs and earning over $1.1 million worth of ETH, the duo soon after went silent on social media, closing down the project's Discord and escaping with the profits.
A “rug pull” refers to such instances in which a projects creator sells NFTs with lofty goals to lure new investors, keeping them around for just long enough to get everyone comfortable, before subsequently running away with all the funds. Usually, this leads to a loss in value for the NFT project as no new updates will be given to the NFT.
Frosties began minting at .04 ETH or $112 at the time but now trades for a measly 0.001 or $3.
This is the first reported case of the Department of Justice charging an NFT creator with alleged fraud, a move that is bound to send shockwaves within the industry.
“NFT’s have been around for several years, but recently mainstream interest has skyrocketed,” said U.S. Attorney Damian Williams in a 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,” he continued. “Our job as prosecutors and law enforcement is to protect investors from swindlers looking for a payday.”
The duo was arrested in Los Angeles according to reports and was even getting ready to launch another NFT scam project called Embers. This would also be an Ethereum based NFT, planned to have 5,555 profile pictures, with minting set to begin on March 26th. Nguyen and Llacuna would've walked away with another $1.5 million worth of ETH if the mint was to sell out.
If found guilty, both of the men could be serving up to 20 years in prison, on one count of conspiracy to commit wire fraud and conspiracy to commit money laundering.