New York authorities have arrested developers of a fake Mutant Ape Yacht Club non-fungible token (NFT) collection and slapped them with fraud charges.
Police arrested the developers on Wednesday last week at John F Kennedy International Airport due to charges of rug-pulling investors, leading to $2.9 million in losses.
The entire collection contained 6,797 NFTs on the Ethereum blockchain, valued at 567 Ether (ETH), but sales plummeted at the start of last year.
Comments on Rug Pull
Homeland Security Investigations (HSI) lead Special Agent, Ivan J Arvelo, said in a Department of Justice (DoJ) statement,
“As alleged, Aurelien Michel perpetrated a ‘rug pull’ scheme – stealing nearly $3 million from investors for his own personal use. Purchasers of Mutant Ape Planet NFTs thought they were investing in a trendy new collectible, but they were deceived and received none of the promised benefits.”
He added: “HSI uses our extensive experience investigating financial crime in conjunction with our cutting edge cyber capabilities to uncover fraud and bring the perpetrators to justice.”
A further statement from Internal Revenue Service (IRS) agent Thomas Fattorusso noted that Michel had defrauded investors with false representations, “things, giveaways, tokens with staking features, and merchandise collections.”
He added that Michel withdrew all the funds after selling the NFTs.
Citing comments from Michel, he had stated on social media that he had initiated the rug pull, adding “we never intended to rug but the community went way too toxic.”
Following his exit from the project, a new community of content creators under the HTMadge pseudonym have aimed to resurrect the collection.
Mango Markets and Cybersecurity Concerns
The news comes after Mango Markets hacker Avraham Eisenberg tweeted his successful rug pull Mango Inu “shitcoin,” leading to roughly $117 million in lost funds.
He claimed in his Twitter feed that he “did nothing wrong” and his actions were “legal.”
He said in October last year that he had deployed coins to fight “exploiting bots” buying up the tokens. The automated programmes buy specific cryptocurrencies based on market capitalisation, availability, and other algorithmic parameters.
According to a recent CertiK report, 2023 would remain a year hit by cybersecurity risks, fraud, malicious attacks, and rug pulls. In 2022, the industry lost roughly $3.7 billion, with $595 million in November alone.
