Over a “rug pull” plot, the US Department of Justice detained two 20-year-old males and charged them with fraud and money laundering. The accused are Ethan Vinh Nguyen and Andre Marcus Quiddaoen Llacua, the creators of the “Frosties” NFTs. Both men could face a maximum sentence of 40 years in prison.
When the inventor of an NFT or gaming programme solicits investments, this is known as a rug pull scheme. After that, they abruptly leave the project while keeping the monies from the investors.
The History and Arrest of the Frosties Rug Pull
Nguyen and Llacua sold the NFTs on January 9 and raised $1.1 million. Frosties, an ice cream-themed project with 8,888 NFTs, was a popular collection. The project sold out within an hour of its public introduction, with each NFT costing about $130 in Ethereum terms.
After selling out the Frosties NFTs for a few hours, the accused abandoned the project. The website for the Frosties was thereafter removed. The duo abandoned the initiative without delivering on their promises to the Frosties’ owners.
They promised rewards to holders, including freebies for those who bought NFTs. Also included are exclusive mint passes to upcoming Frosties seasons and early access to a metaverse game.
Investigators matched Nguyen and Llacuna’s Discord account information, which included their IP address, email address, and phone number, to their Coinbase bitcoin trading accounts. The accounts were linked to a government ID and a Citibank credit card, which helped law police find them.
Investigators also tracked a series of transfers that the couple allegedly exploited to hide where the Frosties monies were being sent.
Nguyen and Llacua announced another NFT project called “Embers” before their imprisonment. The second NFT collection, which appears to be identical to the Frosties NFT, is set to debut on March 26.
NFTs are governed by the law.
“NFTs represent a new era for financial investments,” says Thomas Fattorusso, a criminal investigative agent-in-charge for the Internet Revenue Service. However, the same restrictions apply to a real estate development or an investment in an NFT.”
“You can’t raise money for a business opportunity, then quit it and disappear with the money your investors gave you,” Fattorusso continued.
Each alleged couple was charged with one count of wire fraud, which carries a potential sentence of 20 years in jail. They were also charged with conspiracy to launder money, which carries a potential sentence of 20 years in jail.
“Where there is money to be made, scammers will hunt for methods to steal it,” said U.S. Attorney Damian Williams. In the NFT market, this is completely accurate.
Scammers have targeted the NFT industry, capitalising on investors’ fear of missing out. Several rug pull complaints have surfaced in the last three months. To name a few, there’s Neonexus, Balloonsville, CryptoSis, and Blockverse.
What happened with the Frosties project should deter scammers from employing NFTs in the future. As the NFT business expands, more governments are likely to enact harsher restrictions regarding digital assets. Even yet, NFT aficionados should use caution while investing in NFT projects.
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