The US Department of Justice (DOJ) has released a report stating two of the creators behind the Frosties NFT project have been arrested.
Ethan Nguyen, known as “Meltfrost”, and Andre Llacuna, known as “Heyandre”, are both being charged with multiple counts of fraud for their “rug pull” on investors.
Nguyen and Llacuna are both only twenty years old but have stolen more than $1m from investors. The two created the Frosties project and quickly after the sale shut down the website and all social media sites.
The NFTs were allegedly sold after promises were made of metaverse events, early access to future NFT mints and other special access benefits. Shortly after the sale the team chose to close the project and moved the project’s funds into personal wallets.
The DOJ report states that the team “…abandoned the Frosties NFT project within hours after selling out of Frosties NFTs, deactivated the Frosties website, and transferred approximately $1.1 million in cryptocurrency proceeds from the scheme”.
The Internal Revenue Service Criminal Investigation Unit stated that regardless of how new digital assets and NFTs are, they still fall under pre-existing laws.
Nguyen and Llacuna are both being charged with one count of conspiracy to commit money laundering and one count of conspiracy to commit wire fraud. Both are facing up to 20 years in jail for each charge.
Also included in the report were allegations that the pair were planning to do a new scam project. The new project was called “Embers” and had a similar structure to Frosties. The launch this weekend was projected to make more than $1.5m.
Many cryptocurrency enthusiasts worry about government regulations and action against digital currencies and NFTs. Rulings in these cases can shape how new projects are treated legally.
NFT markets have slowed down in 2022 compared to the previous year. Volumes on top NFT trading platforms have decreased by more than 50% as many worry about the future of the markets during uncertain times.
The NFT market is still large enough to attract the attention of governments. In a recent case the UK government became the first to seize multiple NFTs.
These NFTs were considered part of money laundering and tax evasion. We can expect more governments to begin to target high value NFT projects and their owners.