The US Department of Justice is slapping charges of money laundering and fraud on the founders of the Frosties NFT project after they committed a ‘rug pull.’
DOJ Progresses With Crypto Security Measures
The US Department of Justice (DOJ) is firmly standing by its mission to bolster crypto security. The DOJ had recently established the National Cryptocurrency Enforcement Unit or NCET to curb growing rates of cybercrime plaguing the crypto ecosystem. Now, for the first time ever, the DOJ is actively charging NFT creators with charges after they were accused of fraudulently scamming investors out of their funds and then committing a rug-pull and absconding with the funds.
The founders of the Frosties project, which recently committed a rug pull, have been slapped with money laundering and fraud charges by the DOJ. As per a statement from the Attorney’s Office of the Southern District of New York, the two founders of the project were arrested in LA and charged with one count of wire fraud and one count of conspiracy to commit money laundering.
Frosties Founders Charged With Fraud
The two founders had previously been anonymous but have now been identified as 20-year-olds Ethan Nguyen and Andre Llacuna. Their NFT project titled the Frosties has been accused of being a million-dollar scheme to defraud buyers.
In crypto projects, a ‘rug pull’ happens when the creator of the project abandons the project after gaining funds from investors and fraudulently retains the investments. The Frosties project is a good example of such a ‘rug pull,’ as the founders had promised that Frosties NFT hodlers would be rewarded aptly, with multiple giveaways, access to a metaverse game, and exclusive NFT access in the future. However, the founders failed to deliver on the project’s roadmap and the promised utility when they shut abruptly and abandoned the project. Buyers had already purchased around $1.1 million worth of NFTs from the project, hoping to make big on their investments as promised by the founders. Instead, the two accused transferred all the proceeds to their own crypto wallets with multiple transactions, intended to muddle up the trail of funds.
Discussing the matter of rug pulls, IRS-CI special agent-in-charge, Thomas Fattorusso said,
“You can’t solicit funds for a business opportunity, abandon that business and abscond with money investors provided you. Our team here at IRS-CI and our partners at HSI closely track cryptocurrency transactions in an effort to uncover alleged schemes like this one.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.