The US Attorney’s Office for the Southern District of New York said in a statement it has charged three UK nationals in connection with a 2021 rug-pull scam involving a collection of 10,000 NFTs called ‘Evolved Apes.’
Mohamed-Amin Atcha, Mohamed Rilaz Waleedh, and Daood Hassan, all 23, were charged with wire fraud and money laundering, according to the statement. Each count carries a maximum prison sentence of 20 years.
According to the indictment, the three executed a type of scam commonly known as a “rug pull,” where developers advertise a digital project, collect funds from purchasers, then abandon the project and keep the funds — in this case, 798 Ethereum worth about $2.7 million at the time.
US Attorney Damian Williams said that “the defendants ran a scam to drive up the price of digital artwork through false promises about developing a video game. They allegedly took investor funds, never developed the game, and pocketed the proceeds.”
Williams added: “Digital art may be new, but old rules still apply: Making false promises for money is illegal. As we allege, thousands of people believed these false promises and were tricked into buying these NFTs, including here in the Southern District of New York.”
The statement alleged that the three had laundered the misappropriated funds through multiple cryptocurrency transactions to their own personal accounts.
DL News reported earlier that last year, rug pulls and related scams totalled about $760 million, according to data from blockchain security firm Quantstamp