Two Youths Arrested By Authorities In Los Angeles In US' First NFT Fraud Case

Frosties is an NFT that depicts a character like a snowman. (photo; twitter @solfrosties)

JAKARTA - Two men were arrested and charged with fraud against buyers of non-fungible tokens (NFT) worth US$1.1 million (Rp15.7 billion), on Thursday, March 24. According to US authorities, they are the first fraudsters in the country to be arrested in a federal criminal case involving digital assets, which exploded in popularity last year.

In a statement to the media, State Attorney or Attorney, Damian Williams, in Manhattan said that Ethan Vinh Nguyen, 20, and Andre Marcus Quiddaoen Llacuna, 20, were arrested in Los Angeles, California on Thursday, March 24.

They face charges of wire fraud and conspiracy to launder money in connection with a multi-million dollar scheme to defraud buyers of the NFT "Frosties" they advertise. Frosties is an NFT that depicts a character like a snowman.

Frosties buyers are told that they will be eligible for special prizes, such as giveaways and early access to the game metaverse.

However, on January 9 this year, Nguyen and Llacuna suddenly abandoned the project. According to Attorney Williams, the two even transferred $1.1 million in cryptocurrency proceeds from the scheme to various cryptocurrency wallets under their control. Such a scheme is known as a "Rug pull."

Nguyen's lawyers have not yet commented on the allegations. Likewise, the lawyer from Llacuna has also remained silent about this case.

The NFT market will reach an estimated US$25 billion (Rp358 trillion) by 2021. The NFT consists of unique digital assets that can represent collectible images, game characters, or plots of land in a virtual world.

"Wherever there is money to be made, fraudsters will look for ways to steal it," Williams said in a statement.

Prosecutors said Nguyen and Llacuna had launched the "Frosties" project under a pseudonym. They had also been planning a second sale of NFT called "Embers" before being arrested.

"The trending market and demand for NFT investment is not only attracting real artists, but also scam artists," said Special Agent for Homeland Security Investigations, Ricky Patel in a statement quoted by the NYPost.

"The arrested thieves are suspected of hiding behind online identities, where they promise investors exclusive gifts, prizes and opportunities before implementing their 'pull the carpet' scheme and leaving investors with empty pockets and no legitimate investments," Patel added.

The United States Department of Justice recently signaled an increased focus on crimes related to digital assets by setting up a national cryptocurrency enforcement team.