Ethan Nguyen and Andre Llacuna allegedly scammed NFT enthusiasts of $1.1 million with their Frosties cartoon-like characters. The scam was so easy that it raises the question of NFT risks once again.
Ethan Nguyen and Andre Llacuna created a Frosties project containing 8,888 NFTs and set the price at $130 (Ethereum equivalent). According to details surrounding the project, they promised that there would be 3D versions of the characters and a video game.
Compared to the price of traditional NFTs, Frosties appeared to be a steal, and buyers swept in. Within one hour, the product was sold out. Then, the two men transferred the funds to several crypto wallets, withdrew them from the bank, and shut down the project.
It was so easy that Frosties owners did not even believe it had already happened. According to The Verge, some even created a follow-up series called “Embers” and planned a charity donation and a publicly controlled wallet after initial sales. Only the charity donation was achieved.
In an apology note, Ethan confessed: “I never intended to keep the project going, and I don’t have a plan for anything in the future.”
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After several complaints, investigators managed to find the two men and arrested them in Los Angeles months after — they had tracked their Discord account data, matched IP, email addresses, and phone numbers to a Coinbase account, and uncovered the Citibank credit card info and government ID.
It took some time, but the culprits were found. And while NFTs’ legal status is a bit sketchy and not really defined, the DoJ would not let Ethan Nguyen and Andre Llacuna wriggle free.
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 a real estate development. You can’t solicit funds for a business opportunity, abandon that business and abscond with money investors provided you.”
However, the ease of the scam creates worry about the disadvantages of NFTs. Inflated pricing and rug pull scams (like the one reported here) are two common issues.
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