Morgan Chittum

<div id="highlights-block_623e023fd89df" class="highlights">
 <ul>
 <li>Ethan Vinh Nguyen and Andre Marcus Quiddaoen Llacuna were charged with conspiracy to commit wire fraud and conspiracy to commit money laundering</li>
 <li>The duo could face up to 20 years in prison, according to prosecutors</li>
 </ul>
 
</div>



The 20-year-old creators behind an alleged $1.1 million NFT scam were arrested on Thursday — just days before launching a further potential fraud scheme.&nbsp;



Ethan Vinh Nguyen and Andre Marcus Quiddaoen Llacuna were charged with conspiracy to commit wire fraud and conspiracy to commit money laundering. The duo could face up to 20 years in prison, <a href="https://www.justice.gov/usao-sdny/pr/two-defendants-charged-non-fungible-token-nft-fraud-and-money-laundering-scheme-0" target="_blank" rel="noreferrer noopener">prosecutors said</a>.



In January, Blockworks first <a href="https://cms.blockworks.co/nft-creators-stole-1-3m-from-investors-then-vanished-sources-say/" target="_blank" rel="noreferrer noopener">reported</a> operators of the non-fungible token (NFT) collection called <a href="https://opensea.io/collection/frosties-nft?tab=activity" target="_blank" rel="noreferrer noopener">Frosties</a> funneled funds from the project after investors poured over $1 million into the cartoon ice cream digital collectibles. The collection was rugged, a crypto-native term for when a project’s developers jump ship after siphoning investor funds.  



Marcellus King, a first-time collector who lost about $3,000 in ether from the rug pull, told Blockworks that he is “glad that justice was served to these scammers.”



“I&#8217;m also glad that others have been put on notice in this Wild West space that the authorities are watching,” King said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“This will help bring more honesty and accountability to the NFT market.”</blockquote>



On Jan. 9, 8,888 Frostie NFTs were snatched up on marketplace OpenSea creators soon after shutting down its Discord and Twitter. Project founders collected stolen funds and left after making promises of premiums such as “staking metaverse [and] breeding functions,” as well as “[becoming] eligible for holder rewards,” according to the original website, which has since been taken down.



Controllers of the developer’s wallet address have transferred out most of the initial stolen funds, according to <a href="https://etherscan.io/address/0xab020f50404dcf45cdb2ff0fe90d3e67205b7a35" target="_blank" rel="noreferrer noopener">Etherscan data</a>. 



Per a criminal complaint, Nguyen confessed and apologized to a moderator of Frostie’s community Discord server — sending the mod some ether “for [their] troubles.”



“I know this is shocking, but this project is coming to an end. I never intended to keep the project going, and I don’t have a plan for anything in the future,” the message reads. “I want you to know that I do care. I appreciate you, even if you don’t appreciate me.”



<figure class="wp-block-image"><img decoding="async" src="https://lh4.googleusercontent.com/IlUNmj5DeC-sB_gtL-jeWuXPcIyap7iZu8Gee5V3YTj2QNY3CGia80aEbZAcEFkleYEJ3OY4-7sZCtUfuURfJVfdP-nT-_JeyPl9I_QgIQ_8khVeokwd8nwe57-UMSj5mOT58cNO" alt=""/><figcaption>A screenshot of a Discord conversation released as part of <a href="https://www.justice.gov/usao-sdny/press-release/file/1486816/download" target="_blank" rel="noreferrer noopener">the criminal complaint</a></figcaption></figure>



Defendants also had plans for a follow-up NFT collection, according to the complaint, after siphoning funds from their first project.&nbsp;



The project, dubbed “Embers,” was set to launch March 26 — two days after the duo’s arrest. The project was estimated to garner around $1.5 million in sales.&nbsp;



Ashley, a Frosties NFT holder, told Blockworks the arrest “was a surprise,” but that she “had always heard rumblings of [the project] getting investigated.”&nbsp;



“We hope this criminal case sets a precedent for anyone else who comes into the NFT space looking to scam an innocent community,” Ashley, who did not disclose her last name, said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“It’s the first big crackdown in the NFT world, so scammers should take note.”</blockquote>



Rug pulls account for approximately 37% of all cryptocurrency scams — which in total fetched $2.8 billion last year, according to blockchain research firm <a href="https://blog.chainalysis.com/reports/2021-crypto-scam-revenues/" target="_blank" rel="noreferrer noopener">Chainalysis.</a>



“The trending market and demand for NFT investments has not only drawn the attention of real artists, but scam artists as well,” Ricky Patel, a special agent for Homeland Security Investigations, said in a <a href="https://www.justice.gov/usao-sdny/pr/two-defendants-charged-non-fungible-token-nft-fraud-and-money-laundering-scheme-0" target="_blank" rel="noreferrer noopener">statement.</a> “[The two left] investors with empty pockets and no legitimate investment.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.