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.

By Danny Nelson

Mar 24, 2022 at 6:15 p.m. UTC

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

(Samuel Corum/Bloomberg via Getty Images)

Daniel Alegre

CEO

Yuga Labs

Hear from Yuga Labs new CEO in his first public appearance since assuming the position.

Secure Your Seat

Daniel Alegre

CEO

Yuga Labs

Hear from Yuga Labs new CEO in his first public appearance since assuming the position.

Secure Your Seat

Danny Nelson

Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.

Follow @realDannyNelson on Twitter

Daniel Alegre

CEO

Yuga Labs

Hear from Yuga Labs new CEO in his first public appearance since assuming the position.

Secure Your Seat

Daniel Alegre

CEO

Yuga Labs

Hear from Yuga Labs new CEO in his first public appearance since assuming the position.

Secure Your Seat

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.

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

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.

Danny Nelson

Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.

Follow @realDannyNelson on Twitter

Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.

Danny Nelson

Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.

Follow @realDannyNelson on Twitter