Some of the art used to market Frosties, an NFT project prosecutors say led to a $1.1 million ... [+]
The Department of Justice hit a pair of 20-year-olds with fraud and money laundering charges on Thursday for their role in a $1.1 million scheme involving NFTs, one of the first actions federal authorities have taken to rein in the booming asset class.
Ethan Nguyen and Andre Llacuna, both of Los Angeles, called the project “Frosties” and promised investors future giveaways, additional tokens and a metaverse game built around the brand. But prosecutors say the pair executed a so-called rug pull in January, in which they marketed Frosties through social media and then quickly disappeared with the raised funds.
“Where there is money to be made, fraudsters will look for ways to steal it,” said Damian Williams, a U.S. attorney in New York.
NFTs have soared in popularity over the past year, melding together social media and growing interest in cryptocurrencies. The tokens accounted for nearly $18 billion in total transactions last year, according to a report from two firms tracking the NFT market, NonFungible.com and L’Atelier, a part of BNP Paribas.
As with all of crypto, NFTs are unregulated, but there are increasing signs from Washington that the government could soon move to crack down on the industry through new regulation and prosecutions. Rug pull scams brought in $2.8 billion across crypto last year, according to a report on crypto crime by ChainAnalysis, another firm monitoring crypto and NFTs.
