Two men allegedly behind the "Frosties" non-fungible token (NFT) project, an infamous scam whose Discord server reportedly evaporated hours after mint, were charged Thursday with money laundering and wire fraud by U.S. prosecutors in the Southern District of New York.
It's an early example of U.S. law enforcement prosecuting an alleged NFT "rug pull."
Ethan Nguyen and Andre Llacuna, who prosecutors say are Frosties's pseudonymous backers, defrauded their NFT investors of over $1 million when theft. Facing criminal conspiracy and financial crime charges, they are among the first criminal NFT defendants in the rug-pull era.
"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,” U.S. Attorney Damian Williams said in a press release.
Added Homeland Security Investigations (HSI) special agent Ricky J. Patel:
Protocol reported on the Frosties debacle in a February article.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.