Two US Military Officials Involved In NFT Fraud Scheme

US authorities have been caught carrying out an NFT fraud scheme. (Photo; Doc. NFT Evening)

JAKARTA - Two people, including a senior official and cyber analyst in the US military, were charged with money laundering in an NFT fraud scheme. The scheme deceived hundreds of investors by offering attractive NFT collections, but later disappeared with their funds.

This scheme was revealed in an official statement from the US Immigration and Customs Enforcement (ICE) on February 23, 2024. The two suspects were Devin Alan Rhoden (also known as Denny or Deviinz), 24 years old, from Florida, and Berman Jerry Nowlin Jr. (also known as Refuse or Zayous), 20 years old, from Alabama. They were charged with money laundering and conspiracy to commit fraud via cables after an investigation by Homeland Security.

According to the indictment, Rhoden and Nowlin created three NFT-based Solana blockchain collections called Undead Apes, Undead Lady Apes, and Undead Tombstone. They promote these collections on social media and promise rewards for investors, such as merchandise, lottery, and collaboration with other well-known NFT projects.

However, after successfully selling all NFTs and raising more than 300,000 US dollars (approximately IDR 4.7 billion) in the form of crypto assets from hundreds of investors around the world, Rhoden and Nowlin ignored the collections and transferred funds to their own accounts. They then exchanged crypto assets into cash and disappeared from the public. This action is known as rug pull', which is when the creator or investor of a crypto project leaves him suddenly and takes away funds.

To trick law enforcement, Rhoden and Nowlin also used a technique called chain-hopping', namely transferring funds between various types of crypto assets. This technique is often used by crypto criminals and money laundering to obscure traces and origins of funds. According to blockchain data company Elliptic, the value of illegal cryptocurrencies washed through this technique will reach an estimated US$7 billion (around Rp109 trillion) in 2023.

On February 26, three days after ICE's statement, a new NFT collection also known as Undead Apes appeared on the launchmynft.io site with a user named AZEJGH... R57g. It is not yet known whether this collection has anything to do with Rhoden and Nowlin or just a coincidence.

If found guilty, Rhoden and Nowlin could be sentenced to a maximum of five years in federal prison. Rhoden itself is an active member of the US Air Force serving as a cyber analyst at MacDill Air Base. This case is one example of the risks and challenges faced by the NFT industry, which is still minimal in regulation and transparency.