Frosties creators arrested for $1.1 million NFT rug pull scam
- The creators of the
Frosties project could be looking at over 20 years in prison if they’re found guilty. - The Frosties project was the first NFT
rug pull of 2022, and the scammers made away with $1.1 million in crypto. - Rug pulls have accounted for $2.8 billion in stolen crypto funds in 2021.
Prosecutors in the United States (US) have charged two 20-year-old creators from California with money laundering and fraud charges relating to the Frosties rug pull earlier this year. A rug pull is where fraudsters hype up a non-fungible token (NFT) project using social media, only to make away with the money once users put their money into the project.
The scammers
sold 8888 NFTs to users at an average floor price of 0.04 Ether, making up a total of $1.3 million at the time. The two alleged scammers were arrested in Los Angeles in California and were each
charged with “one count of committing wire fraud”, which could lead to a jail sentence of 20 years if they’re found guilty. Additionally, they have been slapped with a count of conspiracy to commit money laundering, which also carried a 20-year sentence.
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.
U.S. Attorney Damian Williams in press statement
Thomas Fattorusso, the IRS-CI Special Agent-in-Charge of the case, noted that NFTs “represents a new era for financial investments,” adding that the rules that apply to investments in real estate development would also apply to NFTs. “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 to uncover alleged schemes like this one,” he said.
Nguyen and Llacuna aren’t the first to carry out a rug pull scam. Last year, the Iconics project made away with about $150,000 worth of Solana tokens.
In fact, according to blockchain analysis firm
Chainalysis, rug pulls accounted for 37% of all crypto scam revenues in 2021, up from a mere 1% in 2020. The company said that scammers made away with $2.8 billion worth of cryptocurrencies in 2021, thanks to these rug pulls.
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