Digital assets or cryptocurrencies are still a growing investment field. Given cryptocurrencies’ novelty, fraudsters have been flooding the space with elephant-sized promises and little to no fundamental use cases.
These fraudsters often carry out rug pulls and scam projects that defraud investors of their funds. In the past year, digital collectibles or non-fungible tokens (NFTs) have recorded outsized sales volume. Scam artists are swooping into this space as a new series of indictments by the DoJ shows.
Baller Ape NFT Shuts Down, Owner Indicted
The Department of Justice (DoJ) has been a principal character in the cryptocurrency space since the blockchain industry gained momentum last year. Ensuring that bad actors are brought to book for financial misdemeanours, the 150-year-old prosecutor announced its second series of NFT-focused indictments.
In its opening address, the DoJ noted that it was prosecuting six individuals involved in four crypto-related fraud cases. The highlight of the case is the biggest NFT rugpull to date, orchestrated by 26-year-old Vietnamese National Le Anh Tuan, called Baller Ape NFT Club. Tuan, who worked alongside several unknown individuals, is being charged with one count of conspiracy to commit wire fraud and another conspiracy to commit international money laundering.
Le Anh Tuan is said to have launched a digital collectible of cartoon-like figures, including that of the trending ape collections. Soon after the completion of the public sale of the scam NFT investment project, the Vietnamese deleted the website of the Baller Ape NFT and made away with over $2.6 million in investors’ funds, in what investors popularly refer to as a rug-pull in the NFT space.
Tuan and his co-conspirators were said to have engaged in ‘chain hopping’, a covert money laundering scheme to hide his illicit activities. The defendant was said to have converted the illicitly obtained funds into different types of cryptocurrencies using decentralised crypto swapping services to hide his tracks. However, the DoJ was able to uncover his activities using specialised blockchain tracking tools for the purpose.
The DoJ is seeking a maximum prison sentence. If Tuan is guilty on both charges, he faces a 40-year jail term. The Central District of California presides over the case.
What Does This Mean for Baller Ape Investors?
Other crypto fraud cases filed by the DoJ are a cryptocurrency Ponzi and unregistered securities scheme, a crypto initial coin offering (ICO) scheme, and a crypto commodities scheme.
All outlined cases have so far defrauded over $100 million from investors. Assistant Attorney General Kenneth Polite has reiterated the agency’s commitment to bringing these criminals and others to book for their unscrupulous business dealings. According to him, the DoJ is boosting its surveillance activities with powerful blockchain tracing software that will easily identify market manipulation and fraudulent ventures. Kenneth Polite also said that the agency is committed to protecting investors and will spend time educating investors about these scam projects.
As per the possible recovery of these funds to their original investors, the DoJ has advised all users affected by the scam projects to visit its websites in order to identify themselves.
DoJ Turning its Face to NFTs
The DoJ has continued to clamp down on crypto fraud projects, with the top US prosecuting agency charging more than 50 cases in 2021 alone. However, the agency has largely ignored the NFT sub-sector as the nascent space recorded over $25 billion in net sales.
This year, the DoJ is expanding its net to cover the digital collectibles landscape and has already indicted its first NFT rug-pull case in Frosties NFTs. In a March 24 announcement, the agency said defendants Ethan Nguyen and Andre Llacuna reneged on their promises to its project’s investors and carted away $1.5 in cryptocurrency proceeds. The DoJ charged them with conspiracy to commit wire fraud and money laundering, and both parties were on the verge of launching another scam NFT project called Embers.
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Cryptoassets are a highly volatile unregulated investment product. Your capital is at risk.