Evolved Apes NFT Creators Indicted for $2.7 Million Rug Pull

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Key Takeaways

  • Three British nationals indicted for a rug pull scam involving Evolved Apes NFTs, defrauding investors of $2.7 million in 2021.
  • The defendants falsely promised to develop a video game, shut down the project, and laundered the stolen funds.
  • Rug pull scams have caused over $14.5 billion in losses since 2011, with experts advising thorough research and transparency to avoid fraud.

US authorities have charged a team of NFT creators over their alleged involvement in the Evolved Apes project that scammed investors.

On June 6, federal prosecutors in New York indicted three individuals linked to a fraudulent scheme. It defrauded investors of millions of dollars through a rug pull scam involving the Evolved Apes non-fungible tokens (NFTs) in 2021.

What Was the Evolved Apes Project?

Mohamed-Amin Atcha, Mohamed Rilaz Waleedh, and Daood Hassan, all British nationals, created the NFT and are facing serious charges of conspiracy to commit wire fraud and money laundering.

According to a press release from the United States Attorney’s Office for the Southern District of New York, the three men masterminded a classic rug pull scam. They promoted the Evolved Apes NFT project to unsuspecting investors, drawing in purchasers with promises of developing a video game.

The project duped investors into buying worthless NFTs to use the capital for the game’s development and improvement.

However, after successfully raising capital from investors, the defendants abruptly shut down the project and disappeared with the funds. They left investors with worthless digital assets and no developed video game.

Into Thin Air: $2 Million Vanishes

The defendants made off with 798 Ethereum, worth around $2.7 million at the time. The men allegedly laundered the misappropriated money through multiple cryptocurrency transactions, transferring the stolen assets into their accounts to disguise their ill-gotten gains.

U.S. Attorney Damian Williams commented on the uncovered NFT scam, providing a detailed breakdown of the orchestrated scheme:

“Digital art may be new, but old rules still apply: making false promises for money is illegal.  As we allege, thousands of people believed these false promises and were tricked into buying these NFTs, including here in the Southern District of New York. NFT fraud is no game, and those responsible will be held accountable.”

If convicted, the defendants each face a maximum sentence of 20 years for conspiracy to commit wire fraud and money laundering. The severe penalty highlights the seriousness of their crime, which has been a constant factor in the crypto sector.

Rug Pull Scams

According to the Rekt database, over $14.5 billion has been lost to rug pulls since 2011.

The largest rug pull occurred in 2021 when the South African digital assets investment fund “Africrypt” disappeared with 69,000 bitcoins, valued at nearly $4.8 billion.

Experts argue that the best way to prevent a rug pull scam is through in-depth research on the project teams, verification of the legitimacy of the project’s whitepaper, and transparency in the development process.

Additionally, investing in projects with audited smart contracts and avoiding offers that seem too good to be true can further protect against these fraudulent schemes.