By
Chimamanda U. Martha
April 22nd, 2024
As per investigators, the two men conducted a “rug pull” shutting down the Frosties NFT project immediately after conducting token sales and collecting $1 million in funds.
On Thursday, March 24, the US Department of Justice charged two 20-year-old NFT project creators for defrauding investors. Reportedly, the two men stole $1 million in investors’ money by abandoning the project after the token sale. Such NFT “rug pull” models aren’t new and have been part of the market over the last year.
The rapid surge of the NFT market has seen projects attracting gullible investors. Two men – Ethan Nguyen and Andrew Llacuna – are facing charges of wire fraud and conspiracies for committing money laundering.
As per the investigators, the two men created a series of non-fungible tokens dubbed “Frosties”. These NFTs were supposed to grant the purchasers exclusive rights to metaverse-based games, giveaways, and passes to future seasons of the NFTs.
But upon investigation, the prosecutors found that these two men executed a “rug pull” this January 2022 giving up the project instantly after selling the tokens. They deactivated the website for the Frosties NFT project and transferred $1 million to the wallets that they controlled.
However, these two conmen were advertising for another project dubbed “Embers which was supposed to launch later this week. Upon finding this, the investigators arrested the two men in Los Angeles. Speaking of this development, US Attorney Damian Williams said:
“NFTs have been around for several years, but recently mainstream interest has skyrocketed. 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. Our job as prosecutors and law enforcement is to protect investors from swindlers looking for a payday.”
The Frenzy Around NFTs
NFT Projects have been gaining tremendous popularity over the last year. There’s a massive frenzy of investor willing to trade NFTs in the market with sales clocking millions of dollars. Popular celebrities like rapper Eminem and talk-show host Jimmy Fallon also own NFTs.
With such a frenzy around, it becomes difficult from new investors to pick the right projects. Hopefully, the recent case of “Frosties” will make investors to do due diligence at their end. If convicted, the two men will face 20-years of prison.
Regulatory clarity on handling NFT projects another crypto projects will make it easier for investors. Also, the US is set to release its crypto regulations later this year.