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This afternoon, the Department of Justice filed criminal charges against the designer of the Baller Ape Club NFT collection for arranging a so-called "rug pull."
The charges, which were announced alongside those in three other cryptocurrency fraud cases, mark the second time federal prosecutors have gone after an NFT "rug-pull" scheme, in which an NFT project's creators sell NFTs with false promises of community benefits and utility, then abandon the project and make off with investors' funds.
Vietnamese citizen Le Anh Traun is accused of one count of wire fraud conspiracy and one count of international money laundering conspiracy.
Traun reportedly received $2.6 million from Baller Ape NFT purchasers, only to erase the organization’s website and launder the money shortly after. According to the Department of Justice, he transformed the ill-gotten riches into other cryptocurrencies and transferred them across many blockchains, a process known as “chain-hopping.”
Traun may face up to 40 years in jail if convicted.
NFT “rug pulls” are typical in the high-volume, decentralized world of NFT trading, where new collections from many unknown artists appear daily. The NFT market earned $25 billion in sales in 2016 alone. In 2021, the Department of Justice did not pursue a single NFT fraud case.
The federal government signaled its readiness to prosecute such prosecutions for the first time in March of this year when the DOJ announced its first such lawsuit against an NFT developer for scamming purchasers (creators of the well-known “rug-pull” NFT collection Frosties).
The current fees reinforce this hunger.
U.S. Attorney for the Central District of California Tracy L. Wilkison stated, “These cases serve as a crucial reminder that some con artists hide behind trendy buzzwords, but at the end of the day, they are simply seeking to separate people from their money. We will continue collaborating with our law enforcement colleagues to educate and safeguard potential investors on both conventional and emerging investment opportunities.”
Along with the three previous cases unsealed today, the Baller Ape case is the result of a national enforcement effort undertaken by the Department of Justice in collaboration with the Department of Homeland Security and the FBI.
The other cases charged today include an alleged cryptocurrency Ponzi scheme that raised nearly $100 million, a fraudulent initial coin offering that stole $21 million from deceived investors, and an elaborate crypto commodities scheme in which a man promised 600 percent returns to investors he wooed with meetings at Hollywood Hills homes he did not own, using a fake team of armed security guards to create a false image of wealth and power.