The US Justice Department announced that two men have been charged with conspiracy to commit wire fraud and money laundering “in connection with a million-dollar scheme to defraud purchasers of NFTs advertised as Frosties.”
The suspects, Ethan Nguyen and Andre Llacuna, were accused of lying about promised benefits to NFT buyers and withdrawing the cryptocurrency proceeds from the Frosties account through multiple transactions.
Their real-life identities were disclosed after investigators looked into the relevant record of transactions permanently stored on Ethereum’s blockchain and analyzed the associated transfers to accounts on Coinbase.
$1.1M NFT Project
According to the criminal complaint filed by the court, on January 9, 2022, a total of 8,888 Frosties tokens worth approximately $1.1 million were sold 48 minutes after the public sale went live. Each NFT went for 0.04 ETH, which then equaled around $130.
The complaint pointed out that approximately three hours after the sale, “the proceeds of the Frosties NFT sale that had been transferred to Frosties Wallet Address-1 were then transferred to a separate cryptocurrency wallet address (“Fraud Wallet Address-1″).” In total, 356.56 ETH was sent to the “Fraud wallet address,” as later identified by the investigators.
Additionally, as noted by the DOJ press release, Nguyen and Llacuna failed to provide advertised benefits to NFT buyers and transferred cryptocurrencies to wallets under their control.
Identifying the Suspects Behind the Scheme
IRS-CI Investigators matched Nguyen and Llacuna’s IP addresses used for promoting Frosties on Discord with corresponding accounts on Coinbase. The KYC requirements imposed by the US exchange to its customers allowed law enforcement to figure out the identities of the account holders.
Investigators traced activities associated with the fraudulent wallet address and successfully identified transfers made between Coinbase accounts and the fraudulent wallet linked to Frosties funds.
Before Nguyen and Llacuna were arrested in Los Angeles, they were preparing to launch a follow-up NFT scam called “Embers.” It was supposed to go live around March 26, 2022, and generate additional revenue up to $1.5 million in digital assets.
Accused of fraud and money laundering, Nguyen and Llacuna are seen as early indicators of increased US law enforcement resources and tools targeting NFT rug pulls.
