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In summary
- Federal authorities in Miami announced that victims of the CluCoin Cryptocurrency project on BNB Chain will receive notifications via NFTs, following Austin Michael Taylor’s guilty plea to wire fraud.
- Taylor admitted to transferring $1.14 million of investor funds into a personal account and gambling it at online casinos, rather than using it to develop CluCoin.
- Using NFTs to notify victims is a first for law enforcement communications, and Taylor faces up to 20 years in prison for his conviction.
Federal authorities in Miami said Wednesday that victims of the BNB Chain-based cryptocurrency project CluCoin will receive notifications via NFTs — unique Blockchain tokens — after the project’s co-founder pleaded guilty to wire fraud in federal court.
Austin Michael Taylor, who launched CluCoin (CLU) in 2021, admitted to transferring $1.14 million of investor funds to a personal account on a cryptocurrency exchange. The money was raised through the project’s ICO and the funds were intended for the development of CluCoin-related projects, but Taylor then gambled them away at various online casinos, according to authorities.
Taylor streamed on Twitch under the username DNP3, amassing 242,000 followers on the platform. Leveraging his existing social media accounts, Taylor initially told investors that CluCoin would “provide an ongoing income for charitable projects” chosen by the community. The project’s focus later shifted toward developing a video game and a metaverse platform.
“Taylor never disclosed to investors his intentions and that he had gambled CLU investor funds until approximately January 3, 2023,” prosecutors alleged in July. “Taylor issued a public apology (at the time) admitting that he had improperly gambled investor funds.”
In a press release, the U.S. Attorney’s Office for the Southern District of Florida said that “identified victims of CluCoin will be notified via NFTs.” In all of the DOJ’s notices, it represents the first time that NFTs will be used to establish law enforcement communications with victims.
Decrypt reached out to the FBI and DOJ for clarification on how the process will be carried out but did not receive an immediate response. Several investors found through the project’s official Telegram channel told Decrypt that they had not yet received NFTs from authorities in the wallets they had used to invest in CluCoin.
“I personally lost a little over $2,000, as well as the trust of several family members who I convinced to invest,” said one CLU investor named Kevin, who declined to provide his last name. “It’s just been a humiliating experience.”
A CLU investor named Vlad, who also declined to provide his last name, described the CluCoin community as “energetic and engaged.” He said he trusted Taylor after the “project took off well” and followed CluCoin closely before Taylor “suddenly disappeared from the radar.”
Three months after CluCoin was launched, its market cap reached $17 million. Today, the total value of CLU is around $62,000, with less than $5 in trading volume over the past day.
“If the FBI’s involvement would bring me something back, I’d be grateful,” Vlad said. “But I don’t have much hope of getting my $1,000 back.”
NFTs have been used in at least one court case in the US, as a way to issue formal legal notice. Last year, cryptocurrency lawyers notified hackers who stole $970,000 from someone’s self-hosted wallet, using NFTs to transmit official court documents.
“We are pleased to see that the Southern District of Florida is advancing the legal framework by building on the precedent established in our landmark case,” Rafael Yakobi, managing partner at The Crypto Lawyers, told Decrypt. “This progress underscores the importance of adapting legal practices to embrace emerging technologies.”
Prosecutors alleged that Taylor hosted an event called “NFTCon: Into the Metaverse” at a Miami hotel in April 2022 to attract investors. He also claimed that funds diverted to the wallet for CluCoin-related projects would be used for legitimate purposes, prosecutors said.
“He accepts responsibility,” Taylor’s attorney, Benjamin Ryan Stechschulte of Stechschulte Nell, told Decrypt in a statement, adding that Taylor “has no further comment.”
The DOJ said Taylor faces up to 20 years in prison for his wire fraud conviction in the aforementioned press release. The developer and streamer is scheduled to be sentenced on Oct. 31 before U.S. District Judge Jacqueline Becerra.
Edited by Andrew Hayward
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