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The U.S. Justice Department announced Thursday it had arrested and filed criminal charges against the founder of an NFT project it alleges “rug pulled” holders and defrauded them of $2.9 million in cryptocurrency.
Aurelien Michel, 24, the founder of Ethereum NFT collection Mutant Ape Planet, was arrested last night at JFK airport in New York City by federal authorities on wire fraud charges. Michel, a French citizen, resides in the United Arab Emirates (UAE).
The move constitutes the third time federal prosecutors have pursued charges against orchestrators of so-called NFT rug pulls—schemes where an NFT project’s creators sell NFTs on false promises of community benefits, utility, and financial perks, only to abandon the project and make away with investors’ funds.
In this case, the DOJ alleges that Michel promised Mutant Ape Planet NFT holders giveaways, tokens with staking features, and merchandise collections, but followed through on none of those commitments and instead pocketed almost $3 million.
Federal prosecutors cooperated in this action with both the Department of Homeland Security (DHS) and the Internal Revenue Service (IRS).
Making matters more complicated for Michel is the fact that prosecutors claim they have evidence that he conceded in a social media chat with current and prospective Mutant Ape Planet NFT purchasers that he had indeed choreographed a rug pull, but only—allegedly—in response to the conduct of the Mutant Ape Planet community.
“We never intended to rug, but the community went way too toxic,” Michel allegedly told holders.
“Michel can no longer blame the NFT community for his criminal behavior,” Thomas Fattorusso, IRS Acting Special Agent-in-Charge, said in a statement. “ His arrest means he will now face the consequences of his own actions.”
In June, the DOJ filed similar charges against the creator of the Baller Ape Club NFT collection for rug-pulling holders to the tune of $2.6 million. The department’s first-ever rug pull case, against creators of the Frostie NFT project, alleged that Frostie creators defrauded holders of $1.1 million.
Rug pulls are all too frequent in the high-volume, often anonymous, largely unregulated world of NFT trading, which last year generated a staggering $25 billion in sales.
Despite the commonality of such incidents, though, today’s action marks only the third occasion in which federal prosecutors have pursued charges for them.