NFT Creators Stole $1.3M From Investors Then Vanished, Sources Say

key takeaways

”I have never felt that amount of anxiety in my life. [It was my] first NFT ever, and [I] got scammed,” one victim told Blockworks
The majority of the stolen funds have since been transferred out of the creators’ original wallet address

Creators of a non-fungible token (NFT) collection called Frosties vanished after investors poured $1.3 million into the cartoon ice cream digital collectibles.

”I have never felt that amount of anxiety in my life,” a 25-year-old college student, who goes by Antique_Taco online, told Blockworks. “[It was my] first NFT ever, and [I] got scammed.”

Frosties may have been the first NFT “rug pull” of 2022 — when a project’s developers abandon it after siphoning investor funds and removing liquidity. Approximately $30 million was lost in such scams from Sept. to Oct. of last year alone, according to ItsBlockchain.

In the case of Frosties, the anonymous creators collected funds and left after investors had purchased all 8,888 NFTs on Jan. 9 via OpenSea, walking away with almost $1.3 million of ethereum in their wallet.

The NFTs had an average floor price of 0.04 ether or $121 worth of ETH at the time. All 8,888 NFTs sold out roughly 43 minutes after the drop.

Shortly after, developers of the project shut down their Twitter, Discord and closed off all forms of communication. The developer’s wallet address was removed from the collection’s landing page on OpenSea. (The majority of the funds have since been transferred out from the original wallet, according to Etherscan.)

“I went to eat dinner and when I came back I saw that one Frostie was revealed on OpenSea,” Antique_Taco said in a direct message on Twitter. “I was really confused so I typed a message in the Discord about it and as soon as I hit send the Discord disappeared…My heart sank.”

Frostie collectors were promised premiums with the NFT purchase such as “staking, metaverse [and] breeding functions,” as well as “[becoming] eligible for holder rewards such as giveaways, airdrops, early access to the metaverse game and exclusive mint passes to the upcoming seasons,” according to the project’s website, which has since been taken down.

Marcellus King, another Frosties collector who lost about $3,000 in ether, told Blockworks that it was his first foray into digital collectibles.

“I figured that this was going to be my first dive into the NFT market,” King said in a Twitter message. “I was skeptical, since I thought the idea of NFTs was just sort of overhyped and overpriced. So seeing [one] that had a thriving community with a lot of activity, a roadmap, [a] legitimate looking site, [an] OpenSea account and artwork, that was actually pretty damn great.”

‘Unrugging the Frosties’

Original holders of the NFTs banded together via a new Discord on Jan. 9, dedicated to “unrugging the Frosties.”

The group is working on a wrapped contract for the project, which would return stolen funds into the hands of their rightful NFT owners.

“I know everyone is trying to figure out what is going on,” one moderator, who goes by “catdadcapital.eth,” posted in the chat. “We are diligently working behind the scenes to get control of the project one way or another.”

However, the project’s future is still up in the air. Members of its Discord, which has amassed 1,452 members, are still voting on its governance model and roadmap.

“Even though [they] got scammed with the first phase of the project, they want to keep the project alive,” Mike Fasanello, the director of training and regulatory affairs at Blockchain Intelligence Group, told Blockworks in an interview. “A big passion is still there in this community, which is fantastic.”

Fasanello, who has been investigating the rug pull, found out about the potential scam when he came across victim complaints while browsing an NFT subreddit. Fasanello’s team sent an analysis and graph of the stolen funds to Blockworks.

Fasanello began working with one moderator of the project’s new Discord on Jan. 11. Fasanello, who did not disclose the name of the moderator, said the two may file a report with law enforcement in the near future.

Once Fasanello identified himself in the chatroom, however, he was kicked out — leading him to believe there may be “foxes in the henhouse.”

“For somebody to have that sort of access is a red flag,” Fasanello said, adding that two admins have access to the smart contract that underlies the NFT project.

One moderator, who goes by “Shipper,” confirmed to Blockworks that Fasanello was no longer in the Discord and that two admins did create a copy of the same smart contract.

“The project itself, I do have a lot of hope for, as long as the current people in charge of the server, keep their promises, which nobody can be entirely sure of,” Shipper said in an interview with Blockworks.

“Having the loss was unfortunate, but if there is a chance that the project is revived, I’m all for it,” King, the Frosties collector, said.

This is a developing story.

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