Scammers are getting in on the NFT gold rush.
One such scheme came to an end last week when U.S. law enforcement arrested two 20-year-old men, Ethan Vinh Nguyen and Andre Marcus Quiddaoen Llacuna, in Los Angeles in connection with an alleged $1.1 million NFT fraud.
In January, the two launched an NFT collection called Frosties, releasing 8,888 ice cream scoop cartoon characters that sold out within an hour on OpenSea. They promised investors in the project early access to a related metaverse game and other perks, including the ability to “breed” new Frosties from existing characters.
Instead, less than an hour after the January 9 drop, Nguyen and Llacuna promptly abandoned Frosties, shutting down its website and 25,000-member Discord channel, and transferring all the funds into their own cryptocurrency wallets. Such a scam is known as a “rug pull,” where the creators of an advertised NFT or gaming project stop working on the release, but keep investors’ money.
The duo was arrested on charges of conspiracy to commit wire fraud and conspiracy to commit money laundering. They face a maximum prison sentence of 20 years.
“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 for the Southern District of New York Damian Williams said in a statement. “Our job as prosecutors and law enforcement is to protect investors from swindlers looking for a payday.”
The criminal complaint against Nguyen and Llacuna includes a screenshot of an apology message Nguyen sent to a moderator of Frostie’s community Discord server.
