Two alleged masterminds of the Frosties NFT scam have been arrested, the Justice Department announced Thursday.
Ethan Nguyen, who officials say used several handles including “Frostie,” and Andre Llacuna, identified in the charges as “heyandre,” face wire fraud and money-laundering conspiracy charges for defrauding thousands who bought the Frostie NFTs in what became this year’s first major “rug pull.”
Nguyen and Llacuna, who were arrested in Los Angeles, are accused of launching the digital collection of colorful ice-cream-scoop characters and promising buyers a host of money-making features, such as staking and breeding. But the NFT project abruptly shut down hours after the Frosties sold out in January. The accused rug-pullers then transferred $1.1 million in crypto proceeds out of the Frosties wallet, the DOJ said.
Nguyen and Llacuna had started to advertise a new NFT project, Embers, at the time of their arrest, the DOJ said. The project, which was expected to generate $1.5 million in crypto proceeds, was set to launch around March 26. Its website is still online.
“The trending market and demand for NFT investments has not only drawn the attention of real artists, but scam artists as well,” Ricky Patel of Homeland Security Investigations in New York said in a statement.
Mike Fasanello, who helped investigate the rug pull earlier this year when he worked as a director at Blockchain Intelligence Group, said the arrests underlined how financial crimes on blockchain networks are often easier to track.
“This is not the financial crime of old, where investigations took months or years,” Fasanello, who is now chief compliance officer of LVL, a banking and crypto-trading company, told Protocol. “The digital assets space is proving to be a more transparent system than fiat could ever hope to be.”