TechFlow news, November 1 — According to Decrypt, the U.S. Department of Justice announced that two NFT developers have admitted guilt to charges of conspiracy to commit wire fraud and money laundering for carrying out a $400,000 "Rug Pull" scam in 2022. One defendant has been convicted while the other has pleaded guilty; both face up to five years in prison.
The defendants, 21-year-old Berman Jerry Nowlin Jr. and 25-year-old Devin Alan Rhoden, launched three NFT collections—"Undead Apes," "Undead Lady Apes," and "Undead Tombstone"—on the Solana blockchain. Initially priced at $5 each, the NFTs raised $135,000 during their launch. Through false claims about business partnerships and project development plans, the NFT prices surged to as high as $360.
The pair then transferred funds using the cryptocurrency mixer Tornado Cash and employed cross-chain transactions to move assets from Solana to Ethereum, ultimately converting the crypto into U.S. dollars deposited into bank accounts. The Department of Justice stated that such "Rug Pull" schemes constitute investment fraud in cryptocurrency, where developers abandon projects and abscond with investors' funds, rendering the projects worthless.
