DOJ cracks down on 'rug pulls', charging Frosties NFT project founders
The Department of Justice (DOJ) has taken action against an alleged NFT rug pull, after it slapped the founders of the Frosties project with charges relating to fraud and money laundering.
The two founders are accused of purposely concealing their identities to operate a rug pull on the Frosties community by failing to deliver on the project’s roadmap and “utility” which touted rewards for NFT hodlers, giveaways, access to a Metaverse game and exclusive access to future mints from the project.
According to a March 24 release from the Attorney’s Office of the Southern District of New York, 20-year-olds Ethan Nguyen and Andre Llacuna were arrested in Los Angeles and both charged with one count of wire fraud and one count of conspiracy to commit money laundering in “connection with a million-dollar scheme to defraud purchasers” of the NFTs ‘Frosties.’
The DOJ’s complaint alleges that they “abruptly abandoned” and shut down the project within hours of selling out $1.1 million worth of NFTs, and transferred the proceeds to various crypto wallets “under their control in multiple transactions designed to obfuscate the original source of funds.”
“As the term suggests, a 'rug pull' refers to a scenario where the creator of an NFT and/or gaming project solicits investments and then abruptly abandons a project and fraudulently retains the project investors’ funds,” the release stated.
WOW: if you rugpull and don't complete your roadmap, you can be charged with fraud. So many rappers and influencers shaking rn. pic.twitter.com/v7VW7CjoLp
As part of the release, IRS-CI Special Agent-in-Charge Thomas Fattorusso warned that his team is watching crypto closely, and despite NFTs being a relatively new choice for financial investments, the
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