Two men arrested for $1.1 million NFT ‘rug pull’ scam

Frosties

Two men have been charged with fraud and money-laundering over a scheme. After selling the NFTs, they shut down the project and earned around $1 million.

The criminal complaint states that the IRS, Criminal Investigation, and Homeland Security Investigations began investigating the scam in January after receiving complaints. Within an hour of the project's public launch, 8,888 NFTs had sold out.

The creators abandoned it almost immediately. When buyers tried to resell their NFTs, they only earned a few dollars and gave up hope of seeing future promised rewards, including 3D versions of their avatars and a video game. Some community members tried to revive the Frosties as a separate NFT lineup. The two men behind Frosties have been arrested.

The complaint includes an apology and confession from the man. I don't have a plan for anything in the future, and I never intended to keep the project going. I want you to know that I care. Even if you don't appreciate me, I appreciate you.

The follow-up series was supposed to launch later in March. The Red Cross confirmed receiving a $50,000 charity donation and a community-controlled wallet that would hold a quarter of the initial sales funds, but the latter promise appears far more dubious.

Among other things, investigators matched the account data of the two people with corresponding accounts on the exchange. Law enforcement was able to track down the pair thanks to the link between the Citibank credit card and government ID. The money laundered through a series of transfers was traced by investigators.

Criminal cases are less common than schemes. The teams behind the NFT series often don't reveal their legal identities, and the Bored Ape Yacht Club series was founded under a different name. NFT series launches are a recent phenomenon. The legal status of NFTs can be murky.

The IRS-CI Special said that the same rules apply to an investment in an NFT or a real estate development.