“Rug pulls,” a notorious type of scam in the NFT world, now cost investors hundreds of millions of dollars a year. But it was only just this month when federal law enforcement officials bagged their first NFT “rug pull” suspects.
Two 20-year-olds, Ethan Nguyen and Andre Llacuna, face criminal charges in Manhattan federal court for allegedly scamming investors in their NFT project, Frosties. Nguyen and Llacuna purportedly collected $1.1 million from NFT buyers in January and then abandoned the project — in other words, pulled the rug out from under them. According to the government, the pair were plotting a second scheme right before they got caught.
Arrested last week, Nguyen and Llacuna are each charged with conspiracy to commit wire fraud and conspiracy to commit money laundering, and each face a maximum of 20 years in prison if proven guilty.
As interest around buying and selling NFTs has exploded, with the size of the market estimated at over $40 billion, bad actors have continued to pull scams on unsuspecting buyers. In the Web3 space, the term for the most common type of scam is “rug pull” — the founders of an NFT project pull the rug out from under its investors by disappearing with whatever funds they’ve amassed at the time. Chainalysis estimates that as much as $280 million was stolen from investors in rug pulls in 2021 alone.
Given their perceived anonymity, or at least pseudonymity, cryptocurrencies and their cousins…
