Two men were charged with fraud for defrauding buyers of non-fungible tokens, or NFTs, of $1.1 million dollars by failing to provide promised benefits and closing their site once their "Frosties" NFTs, pictured here, sold out. Photo courtesy U.S. Attorneys Office for the Southern District of New York
March 24 (UPI) -- Two men were charged with carrying out a $1 million NFT scam in January, authorities said Thursday.
Ethan Nguyen, 20, and Andre Llacuna, 20, were charged with conspiracy to commit wire fraud and conspiracy to commit money laundering in a "rug pull" scheme in which they accepted millions of dollars of payments for non-fungible tokens, or NFTs, and failed to deliver promised benefits, the U.S. Attorneys Office for the Southern District of New York said in a statement.
According to the complaint, Nguyen and Llacuna sold a series of NFTs known as "Frosties" and promised that purchasers would gain access to rewards such as giveaways, early access to a metaverse game and exclusive access to future Frosties seasons.
However, on Jan. 9, within hours of selling the final Frosties NFT, the pair deactivated the Frosties website and transferred about $1.1 million in cryptocurrency earned from the sales to various cryptocurrency wallets they controlled in multiple transactions in an effort to disguise where the funds came from.
"As we allege, Mr. Nguyen and Mr. Llacuna promised investors the benefits of the Frosties NFTs, but when it sold out, they pulled the rug out from the victims, almost immediately shutting down the website and transferring the money," U.S. Attorney Damian Williams said. "Our job as prosecutors and law enforcement is to protect investors from swindlers looking for a payday."
Nguyen and Llacuna had also been advertising a second NFT project with the name "Embers," which authorities believe was another fraud scheme given the similarity to Frosties, that was meant to launch on Saturday.
Both charges filed against Nguyen and Llacuna carry a maximum sentence of 20 years in prison.