NFT scammers were apprehended in the United States after amassing over a million dollars in ETH and pulling the rug out from under the project.
Two men have been charged with conspiracy to commit wire fraud and money laundering "in connection with a million-dollar plan to defraud purchasers of NFTs advertised as Frosties," according to the US Justice Department.
Ethan Nguyen and Andre Llacuna, the suspects, were accused of misrepresenting to NFTs customers about promised benefits and removing cryptocurrency earnings from the Frosties account in several transactions.
Investigators dug into the relevant record of transactions permanently preserved on Ethereum's blockchain and studied the corresponding transfers to Coinbase accounts, which revealed their true identities.
Rugpulled $1.1 Million NFT Project
According to the court's criminal complaint, a total of 8,888 Frosties tokens worth around $1.1 million were sold out 48 minutes after the public sale began on January 9, 2022. Each NFT cost 0.04 ETH, which was roughly $130 at the time.
"The profits of the Frosties NFT sale that had been transferred to Frosties Wallet Address-1 were subsequently transferred to a different cryptocurrency wallet address ("Fraud Wallet Address-1") about three hours after the sale," according to the complaint.
The investigators eventually discovered that 356.56 ETH was transmitted to the "Fraud wallet address."
Nguyen and Llacuna also did not fulfill the benefits advertised to NFT buyers and transferred the bitcoins to wallets under their control, according to the DOJ news release.
Identifying the Perpetrators of the Fraud
Investigators from the IRS-CI matched Nguyen and Llacuna's IP addresses used for marketing Frosties on Discord with Coinbase accounts.
Law enforcement was able to determine the identities of account holders because to the KYC criteria established by the US exchange on its customers.
Investigators were able to track down the activity related with the fraudulent wallet address and successfully identify transfers between Coinbase accounts and the fraudulent wallet tied to Frosties funds.
Before being apprehended in Los Angeles, Nguyen and Llacuna were planning to begin a new NFT fraud called "Embers." It was expected to go live on March 26, 2022, and produce up to $1.5 million in digital assets in additional revenue.
Nguyen and Llacuna, who have been charged with fraud and money laundering, are seen as an early indicator of US law enforcement stepping up its resources and instruments to combat NFT rug pulls.