Did NFT sellers Ethan Nguyen and Andre Llacuna conspire to commit wire fraud, money laundering?

Ethan Vinh Nguyen, 20, and Andre Marcus Quiddaoen Llacuna, 20, allegedly ran a fraudulent non-fungible tokens (NFT) project called Frosties. The two are accused of transferring the cryptocurrency proceeds of the scheme to various cryptocurrency wallets under their control instead of providing the benefits advertised to purchasers of Frosties utility NFTs.

Since in or about January 2022, the Internal Revenue Service, Criminal Investigation (IRS-CI) and the Department of Homeland Security (HSI) have been investigating a NFT fraud scheme based on reports from Frosties NFT purchasers. According to the purchasers, they had been defrauded in a rug pull, a scenario where an NFT or gaming project creator solicits investments and then abruptly abandons the project but fraudulently retains the investors’ funds.

As NTF sellers, Nguyen went by Frostie, Jakefiftyeight, Jobo, Joboethan and Meltfrost while Llacuna went by heyandre. Their legal identities were disguised to Frosties NFT purchasers, who expected that they would be eligible for holder rewards, including giveaways, early access to a metaverse game and exclusive mint passes to upcoming seasons of the project.  

Within hours after selling out of Frosties NFTs on January 9, 2022, Nguyen and Llacuna allegedly abruptly abandoned the Frosties NFT project and deactivated the Frosties website. They also allegedly transferred approximately $1.1 million in cryptocurrency proceeds from the scheme to various cryptocurrency wallets under their control in multiple transactions designed to obfuscate the original source of funds.  

After abandoning the Frosties NFT project, Nguyen and Llacuna advertised a second NFT project under the name Embers, which was expected to launch on or around March 26, 2022. But on March 24, 2022, the two were arrested in Los Angeles, California, United States.

Nguyen and Llacuna were each charged with one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering. Both charges carry a maximum sentence of 20 years in prison.