A recent criminal complaint unsealed by the U.S. Federal Court in Brooklyn is among the first-ever precedents of criminal investigation against creators of non-fungible tokens (NFTs).
NFT dev charged with rug pull with $2.9 million stolen
According to a statement by the Eastern District of New York U.S. Attorney's Office, Aurelien Michel, a French citizen and UAE resident, was arrested for defrauding the purchasers of Mutant Ape Planet NFTs. The collection closely resembled the famous Mutant Ape Yacht Club by Yuga Labs, but had nothing in common with it.
Non-Fungible Token (NFT) Developer Charged in Multi-Million Dollar International Fraud Scheme— US Attorney EDNY (@EDNYnews) January 5, 2023
Purchasers of "Mutant Ape Planet" NFTs Were Defrauded of $2.9 Million
Announced with @HSINewYork @IRSCI_NY https://t.co/ohuQJdnUb1
Michel has already appeared before the U.S. Magistrate Judge James R. Cho. The NFT artist created and distributed a collection of tokens that were equipped with falsely promoted utilities, rewards and bonuses. However, he just "pulled the rug" and withdrew $2.9 million from investors' deposits.
As buyers were left with "worthless" tokens, Michel allegedly spent all the money for his own benefit.
Breon Peace, United States Attorney for the Eastern District of New York, admitted that unfortunately this scheme is not unique: many investors were defrauded in a pretty similar manner:
As alleged, the defendant used a traditional criminal scheme to defraud consumers eager to participate in a new digital asset market. Protection from fraud and manipulation extends to all consumers and investors, including those participating in the fast-evolving market for NFTs and other crypto assets
It is interesting that, according to the statement, the rug pull mastermind is only charged with the fact that the purchasers of his NFTs did not get "rewards," "bonuses" and "airdrops."
"Community went way too toxic"
There is a certain irony in the fact that 6,797 "mutants" of this collection are still being offered on OpenSea, the largest NFT marketplace. Meanwhile, some of them are only $10 worth.
Michel has allegedly confirmed the fact of the rug pull privately. However, he is sure that the purchasers of the NFTs themselves are to blame for this drama:
We never intended to rug but the community went way too toxic
According to an IRS officer, the defendant "can no longer blame the NFT community" for his criminal activity and should be held accountable for the fraud.