The U.S. Attorney today announced charges against three UK nationals for their involvement in the “Evolved Apes” NFT fraud scheme.
The United States Attorney for the Southern District of New York Damian Williams and James Smith, the Assistant Director of the New York Field Office of the FBI, announced the unsealing of an indictment charging three UK nationals: Mohamed-Amin Atcha, Mohamed Rilazh Waleedh, and Daood Hassan, with conspiracy to commit wire fraud and money laundering.
“Evolved Apes” Rug Pull Scam
The charges are in connection to their scheme of defrauding victims through the sale of non-fungible tokens (NFTs) from the “Evolved Apes” collection.
According to the indictment, Atcha, Waleedh, and Hassan orchestrated a “rug pull” scam in the fall of 2021. In crypto vocabulary a rug pull is a type of exit scam in which developers first raise money from investors through the sale of tokens or NFTs and then abruptly shut down the project vanishing away with the raised funds.
Evolved Apes was a collection of 10,000 unique NFTs. They advertised the NFT project in a way where the funds raised would be used to develop a related video game that would in turn increase the NFTs’ value.
The promised video game never materialized as the anonymous developer “Evil Ape” vanished a week after its launch, siphoning 798 ether [approximately $3 million at today’s market price and $2.7 million at the time] from the project’s funds.
The trio then laundered the misappropriated funds through multiple cryptocurrency transactions to their personal accounts, the indictment said.
“As alleged, 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. Digital art may be new, but old rules still apply: making false promises for money is illegal.” – Williams
Williams said thousands of people were tricked into believing in their false promises and thus bought these NFTs. But “NFT fraud is no game, and those responsible will be held accountable,” he stated.
FBI Assistant Director James Smith called out the trio for “ghosting customers” and perpetrating the NFT scam “out of a selfish desire for a quick profit.”
“[This] not only reflects poor business integrity, it also violates the implicit trust buyers place in sellers when purchasing a product, no matter if that product is in a store or stored on a blockchain.” – Smith
Atcha, Waleedh, and Hassan, all aged 23, are charged conspiracy to commit wire fraud and money laundering, both of which carries a maximum sentence of 20 years in prison.
The actual sentences will be determined by a judge based on the U.S. Sentencing Guidelines and other statutory factors.
Rug Pulls and their Murky History
Rug pulls and cryptocurrency scams have reportedly cost people $27 billion till date. Total number of such incidents stands at 861 with the largest rug pull so far being that of OneCoin which was costed $4 billion in stolen funds.
OneCoin, at its peak, was thought to have more than 3 million active members from across the globe. To date it is believed to be the most “successful” crypto scam as search continues for its perpetrator the “Cryptoqueen” Ruja Ignatova. She was added to the FBI’s ‘Ten Most Wanted Fugitive List’ in July 2022 – where she remains today.
The Missing Cryptoqueen was reported dead in unconfirmed reports but an investigation from the BBC team, whose results were published last week, said the investigating team received details on Ignatova’s various sightings and whereabout tip-offs even after her alleged murder took place. She allegedly has links with the Bulgarian underworld, whom she also entrusts with keeping her physically safe.