US Justice Dept. Charges 2 in NFT 'Rug Pull' Scheme

"They pulled the rug out from under the victims," U.S. Attorney Damian Williams said of the creators of the Frosties NFT collection.

AccessTimeIconMar 24, 2022 at 6:15 p.m. UTC
Updated Mar 24, 2022 at 8:16 p.m. UTC

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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:

"The arrested thieves allegedly hid behind online identities where they promised investors rewards, giveaways, and exclusive opportunities before implementing their 'rug pull' scheme – leaving investors with empty pockets and no legitimate investment. HSI New York's Dark Web & Cryptocurrency Task Force worked closely with our IRS-CI partners to identify and shut down these fraudsters as they prepared to launch the sale of yet another NFT project that would have likely scammed countless others."

Protocol reported on the Frosties debacle in a February article.


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Danny is CoinDesk's deputy business editor. He owns BTC, ETH and SOL.

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Danny is CoinDesk's deputy business editor. He owns BTC, ETH and SOL.