The Department of Justice (DOJ) arrested the two 20-year-old founders of the “Frosties” NFT project for wire fraud and money laundering. The duo raised approximately $1.1 million of Ether by selling 8,888 NFTs of ice-cream-scoop themed characters (Frosties) in an hour, only to execute a rug pull.
In particular, the individuals (who concealed their identities) siphoned off the funds raised and closed the project’s Discord channel without delivering on the project’s utility, e.g., alleged early access to future mints and metaverse projects. This case is noteworthy because it highlights: (A) the risk of fraud when transacting with NFT sellers whose identities have not been verified, and (B) increased government focus on an area ripe with fraud, presumably due to the DOJ’s creation in October 2021 of a National Cryptocurrency Enforcement Team (NCET). You can access the DOJ’s press release here. And good news! If you missed the original sale, you can still get them for cheap on OpenSea. Happy collecting!
