Damian Williams, United States Attorney for the Southern District of New York, Thomas Fattorusso, Special Agent in Charge of the Internal Revenue Service, New York Field Office, Criminal Investigation (“IRS-CI”), Ricky J. Patel, the Acting Special Agent in Charge of the Department of Homeland Security’s (“HSI”) New York Field Office, and Daniel B. Brubaker, Acting Inspector in Charge of the US Postal Inspection Service’s (“USPIS”) New York Office , announced that ETHAN NGUYEN, alias “Frostie”, alias “Jakefiftyeight”, alias “Jobo”, alias “Joboethan”, alias “”Meltfrost” and ANDRE LLACUNA, alias “heyandre”, have been charged in connection with a criminal complaint for conspiracy to commit wire fraud and conspiracy to launder money, in connection with a million dollar scheme to defraud buyers of NFTs advertised as “Frosties”. Rather than providing the advertised benefits to Frosties NFT buyers, NGUYEN and LLACUNA transferred the cryptocurrency proceeds from the program to various cryptocurrency wallets under their control. Prior to their arrest in Los Angeles, Calif., NGUYEN and LLACUNA were preparing to launch the sale of a second set of NFTs advertised as “Embers”, which were expected to generate approximately $1.5 million in crypto revenue. change.

US Attorney Damian Williams said: “NFTs have been around for several years, but public interest has recently exploded. Where there is money to be made, fraudsters will look for ways to steal it. As we claim, Mr. Nguyen and Mr. Llacuna promised investors the benefits of NFT Frosties, but when they sold out, they pulled the rug out from under the victims’ feet, almost immediately shutting down the website and transferring the money. Our job as prosecutors and law enforcement is to protect investors from wage-seeking scam artists.

IRS-CI Special Agent in Charge Thomas Fattorusso said, “NFTs represent a new era for financial investments, but the same rules apply to an investment in an NFT or real estate development. You can’t solicit funds for a business opportunity, abandon that business, and run away with the money investors have provided to you. Our team here at IRS-CI and our partners at HSI closely monitor cryptocurrency transactions in an effort to uncover suspected schemes like this.

HSI’s Acting Special Agent in Charge, Ricky J. Patel, said, “The market trend and demand for NFT investments has not only caught the attention of real artists, but also scammers. Arrested thieves allegedly hid behind online identities where they promised investors rewards, freebies and exclusive opportunities before implementing their ‘rug pull’ scheme, leaving investors with empty pockets and no legitimate investment . HSI New York’s Dark Web & Cryptocurrency Task Force worked closely with our partners IRS-CI to identify and stop these fraudsters as they prepared to launch the sale of yet another NFT project that likely scammed d countless others.

USPIS Acting Inspector-in-Charge Daniel B. Brubaker said, “The rise and popularity of various cryptocurrencies has changed the landscape of buying and selling investments, providing many opportunities for new fraud schemes. Today’s arrests involved non-fungible tokens (“NFTs”), opening the door to alternative investment options and substantial risk. These assets may seem like a good deal or a way to get rich, but in many cases, like this situation, only result in the loss of your money. Postal Inspectors will pursue fraudsters with our law enforcement partners in all consumer markets and advise consumers to pursue emerging investment trends with diligence and skepticism.

As alleged in the complaint[1]:

As of or around January 2022, the IRS-CI and HSI have been investigating an NFT fraud scheme based on reports from purchasers of Frosties utility NFTs.[2] that they had been defrauded in what is colloquially known as a “rug draw”. As the term suggests, a “rug pull” refers to a scenario where the creator of an NFT and/or game project solicits investment, then abruptly abandons a project and fraudulently withholds funds from project investors. . According to the official Frosties website, Frosties purchasers would be eligible for holder rewards, such as, among others, freebies, early access to a metaverse game, and exclusive mint passes to upcoming Frosties seasons. In fact, on or about January 9, 2022, NGUYEN and LLACUNA, whose legal identities were disguised for Frosties NFT buyers, abruptly abandoned the Frosties NFT project within hours of the sale of the Frosties NFT, deactivated the website from Frosties and transferred approximately $1.1 million. in the proceeds of cryptocurrency from the system to various cryptocurrency wallets under their control in multiple transactions designed to obscure the original source of funds. A screenshot taken from the Frosties website is shown below:

Prior to their arrest, NGUYEN and LLACUNA were advertising a second NFT project under the name “Embers”, which, based on similarities to the Frosties NFT project, would be another fraud scheme to be launched on March 26. or around that date. 2022. A screenshot taken from Embers website is shown below:

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ETHAN VINH NGUYEN, 20, and ANDRE MARCUS QUIDDAOEN LLACUNA, 20, are each charged with one count of wire fraud, contrary to 18 USC § 1349, which carries a maximum sentence of 20 years in prison; and one count of conspiracy to launder money, contrary to 18 USC § 1956(h), which carries a maximum sentence of 20 years in prison.

The maximum potential penalties described above are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the designated judge.

Mr. Williams praised the outstanding investigative work of HSI, IRS-CI and USPIS.

The case is being handled by the Bureau’s Complex Fraud and Cybercrime Unit. Assistant United States Attorney Danielle M. Kudla is charged with the prosecution.

If you believe you have been a victim of this crime, please contact HSI Special Agent Paul Nugent at [email protected]