This NFT really was non-fungible in the end. It never existed.
The creator of the Mutant Ape Planet NFT, who sought to capitalize on the ape-themed art craze that swept the crypto world two years ago, has pleaded guilty to stealing $2.9 million from investors in what prosecutors said was a classic “rug-pull” fraud.
Aurelien Michel, 25, admitted he announced the issuance of the NFT — short for non-fungible token, a type of blockchain-backed art work — in early 2022 to raise millions from investors but that he never had any intention of actually creating the art.
The project came on the coattails of the Mutant Ape Yacht Club, a wildly popular series of NFTs that had sold tens of millions of dollars worth of digital art.
Between January and April of that year, federal prosecutors in New York say Michel, a French national who lived in Dubai, raised over $2.9 million on the ethereum blockchain, by selling 9,999 versions of the token. But when it came time to actually issue the artwork, Michel, who was known to investors simply as James, announced that the NFT wasn’t going to be released.
“We never intended to rug but the community went way too toxic. I recognize that our behaviour led to this,” prosecutors said Michel wrote in a posting on the messaging platform, Discord.
Michel then kept the money, prosecutors said.
Federal prosecutors called the move as a “rug pull,” a colloquial term used to “describe a scheme in which an NFT developer solicits funds from prospective NFT purchasers promising them certain benefits, and, once the purchasers’ funds are used to purchase the NFTs, the developers abruptly abandon the project and fail to deliver the promised benefits.” The last part of the rug pull is that the scammers keep the money, prosecutors said.
Michel was arrested and charged in January while traveling to the U.S., according to court documents, and was placed under house arrest. The case was brought in the U.S. because many of the victims were American, prosecutors said.
“Michel has admitted that he conspired with others to defraud consumers eager to participate in a new digital asset market,” stated Breon Peace, the U.S. attorney in Brooklyn. “Our Office is acutely aware that criminal actors are taking advantage of the constant pace of innovation in the digital asset space and the investing public’s desire to become involved in cryptocurrency to perpetrate large-scale frauds.”
Michel faces up to five years in prison when he is sentenced. As part of his guilty plea, Michel agreed to forfeit $1.4 million.
Michel’s attorney, Ira Lee Sorkin, said as part of the agreement with prosecutors, Michel would be allowed to serve whatever sentence he might receive in a prison in France.
Read the full article here
