Scammers Display Dark Side to NFTs With Rug Pull

Most of the time, NFTs are painted in a positive light. Even if their primary use case isn't always clear, it's difficult to deny the staying power of digital collectibles these days and the potential to earn money.

Non-fungible-token sales are off to a running start in 2022, with the popular OpenSea NFT marketplace setting a new record for monthly sales in January at $5 billion.

Unfortunately, as its profile has risen, the blockchain, where NFTs are created, has also been known to attract nefarious activity. NFTs have become one of the main targets.

We previously told you about some of the most common NFT scams, such as wash trading and money laundering.

Evidence that these scams have infiltrated the market surfaced when the U.S. Department of Justice announced it charged a pair of defendants in an NFT-related fraudulent scheme.

The shady ex-project is behind the Frosties NFTs, led by defendants Ethan Nguyen and Andre Llacuna. Frosties took the form of cartoon NFTs.

The DOJ alleges that the defendants sold over $1 million worth of these digital avatars before pulling off what's known as a “rug pull.”

The scam involved escaping with the proceeds, spreading the crypto funds across various digital wallets, and leaving investors holding the bag despite promises of rewards.

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