Two men arrested for $1.1 mn NFT 'rug pull' scam

US government prosecutors have charged two men with fraud and money laundering over a cryptocurrency "rug pull" scheme.

Ethan Nguyen and Andre Llacuna allegedly earned around $1.1 million by selling non-fungible tokens (or NFTs) based on cartoon-like characters called "Frosties," reports The Verge.

After selling the NFTs, they shut down the project and transferred its funds to a series of separate crypto wallets, leaving Frosties owners bereft of promised rewards.

According to the criminal complaint, the Internal Revenue Service, Criminal Investigation (IRS-CI), and Homeland Security Investigations (HSI) began investigating Frosties in January, shortly after receiving complaints about the scam.

Frosties was a buzzy project whose 8,888 NFTs, priced at the Ethereum equivalent of roughly $130, sold out within an hour of the public launch.

But as chronicled by Protocol, the creators abandoned it almost immediately, the report said.

Buyers earned only a few dollars when they tried to resell their NFTs, and they gave up any hope of seeing future promised rewards, including 3D versions of their avatars and a Frosties video game.

Some scammed community members nonetheless attempted to resurrect the Frosties as a separate NFT lineup. Now, the two men behind Frosties have been arrested in Los Angeles.