One NFT developer has been found guilty and another has pleaded guilty in a US court to conspiracy to commit wire fraud and money laundering, in connection with an NFT “rug pull” valued at $400,000.
This follows the sale of three NFT collections on Solana called “Undead Apes,” “Undead Lady Apes,” and the partial sale of “Undead Tombstone.” These collections were minted for $5 each in 2022, generating $135,000 to the wallets controlled by Berman Jerry Nowlin Jr., 21, and Devin Alan Rhoden, 25.
In the weeks that followed, the total raised by the scammers rose to nearly $400,000 as hundreds of victims invested in the projects, with Undead Apes reaching a peak of $360 each.
The projects’ success was driven by “completely false statements,” according to the Department of Justice (DOJ) report. This included statements about future partnerships with “prominent businesses,” how much capital would be reinvested in the project, and details about the profit that would be provided to holders.
In April 2022, just a month after the release of Undead Apes, scammers began the creation of 632 “Undead Tombstone” NFTs, which was abruptly stopped when the pair performed a ‘rug pull’ on the projects. Specifically, the Discord and Twitter accounts were deleted and all communication was cut off with the community.
According to the DOJ press release, it is considered a rug pull, as: “a fraudulent Cryptocurrency investment scheme where developers abandon a project, take investor funds, and leave investors with a worthless asset.”
The pair used the Tornado Cash cryptocurrency mixer, which is now banned in the US, to hide the destination of the funds. The statement highlighted the movement of funds between Solana and Ethereum, using a technique called “chain hopping” to confuse those tracking them. Nowlin, a resident of Alabama, then exchanged the cryptocurrency for US dollars and transferred the funds to his bank account.
On Thursday, it was announced that Nowlin was found guilty of conspiracy to commit wire fraud and money laundering in connection with the rug pulls. He now faces a maximum of five years in federal prison, with his sentencing scheduled for January 2025.
As for Florida resident Rhoden, he pleaded guilty to conspiracy to commit wire fraud and money laundering in May 2024. His sentencing is scheduled for later this month.
Edited by Stacy Elliott.
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