US DOJ Arrests Two in Alleged NFT Money Laundering, Rug Pull Scheme

Richard Marley
March 25, 2022
3 minutes read
1790

The US Department of Justice has arrested two in a $1.1 million non-fungible token fraud and money laundering case where a rug pull scheme was used.

The two arrested individuals, Ethan Nguyen and Andre Llacua are accused of selling NFTs called “Frosties” and taking the proceeds in a “rug pull scheme”. The rug pull scheme involves the creator of the NFT or gaming program taking in investments and then suddenly disappearing while fraudulently retaining the investors’ money.

The two individuals reportedly raised $1.1 million by selling the NFTs, which are tradable digital representations of art and other items, and then closed down the project without providing the owners of Frosties the promised rewards.

The investors were promised holder awards, giveaways, early access to a metaverse game, and exclusive mint passes to upcoming Frosties seasons.

However, in January, the accused dropped the Frosties NFT project just a few hours after selling out of their NFTs. The process involved the deactivation of the Frosties website, transfer of money to cryptocurrency wallets, and concealing the origins of the obtained money.

Prior to the arrest, Nguyen and Llacua were promoting a second NFT project under the name of “Embers”. Embers NFT also had similar characteristics as the Frosties NFT and was found to be part of another fraud scheme after its launch on March 26.

“NFTs represent a new era for financial investments, but the same rules apply to an investment in an NFT or a real estate development,” Thomas Fattorusso, a criminal investigation agent-in-charge for the Internet Revenue Service, said in a statement. “You can’t solicit funds for a business opportunity, abandon that business and abscond with money investors provided you.”

U.S. Attorney Damian Williams noted that “where there is money to be made, fraudsters will look for ways to steal it.” Just like the days when cryptocurrency was new, the NFT market is also starting to get flooded with scammers trying to cash in on investors entering the market because of a fear of missing out.

The accused pair have each been charged with one count of committing wire fraud, which carries a maximum sentence of 20 years in prison, and one count of conspiracy to commit money laundering, which also carries a maximum sentence of 20 years in prison.

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IMF Urges Central Bank of Seychelles to Upgrade Transparency and AML Controls
The Central Bank of Seychelles (CBS) has been advised by the International Monetary Fund (IMF) to have transparent practices and AML controls.

The International Monetary Fund (IMF) has urged CBS, the Central Bank of Seychelles, to incorporate refined practices in different accountability and governance areas. These include confidentiality, supervisory & confidentiality policies along with internal AML/CFT protocols.

According to the statement by IMF, CBS is giving information regarding legal structure, mandate, and a few key elements related to anti-corruption arrangements, risk and human resource management, and accountability on its website.

The review of IMF stated, “To better support the public’s perception of the CBS as a well-governed institution, it should consider highlighting these aspects in its annual report, and/or provide additional information on its website, particularly on human capital management, anti-corruption policies and decision-making arrangements.”

As per IMF’s review, CBS needs to work on several elements, including information’s accessibility to its internal governance arrangements. It could be done by maintaining the Annual Report’s respective sections and website. Moreover, it must overhaul the proceedings by publishing its Code of Conduct and Ethics.

“The legal mechanism for confidentiality issues has been established, but the dissemination and disclosure of the confidentiality framework could be enhanced. The CBS discloses basic information on its AML/CFT supervisory powers and policies, as well as on its related internal control framework, but disclosures on the processes and outcomes of its AML/CFT external policies and internal controls are limited,” said CBS Transparency Code Review of IMF.

IMF review said that the ensurance of transparency practices with new functions and powers by CBS would be effective for its own benefit. The practices adopted by CBS must comply with the powers acquired by the coming legislative act.

IMF’s CBS Transparency Code Review said, “In the last few years, the CBS’s regulatory powers have been substantially expanded with the adoption of AML/CFT Act and Financial Consumer Protection Act. Moreover, the forthcoming Financial Stability Act is expected to provide a transparent legal basis for the CBS’s (and other financial sector regulators) actions on financial stability. These legislative acts will require an expansion of the CBS’s transparency practices so that the related CBS activities continue to be appropriately disclosed to stakeholders.”

The review aims to identify the strength and improvement areas of CBS by allowing it to evaluate its transparency practices. The review presents the map of CBS’s transparency choices in comparison to several practices in three different categories (core, comprehensive, and expanded).

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US DOJ Arrests Two in Alleged NFT Money Laundering, Rug Pull Scheme

An Overview of Perpetual KYC

The Need for Perpetual KYC in Banking Sector

Recent Crime Cases in the Banking Industry

Criminal Gang in US Charged with Bank Fraud and Money Laundering

Two Former Employees of Major Bank Charged with Loan Fraud

Global Regulatory Authorities Monitoring the Banking Sector

US

UK

Securing Banking Organizations Through Perpetual KYC

What Shufti Pro Offers?

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Let’s prove your customer’s

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