A developer of the Mutant Ape Planet non-fungible token (NFT) collection has been arrested in New York on fraud charges.
A Jan.5 United States Department of Justice announcement reveals that according to a complaint filed on 3 January, Aurelien Michel, a 24-year-old French citizen living in the United Arab Emirates, and other unnamed defendants promised buyers of the Mutant Ape Planet NFTs various benefits.
Those promises included “rewards, raffles, exclusive access to other cryptocurrency assets, and the support of a community wallet with funds to be used to market the NFTs”.
However, after all the NFTs were sold, Michel and the other defendants transferred nearly $2.9 million worth of earnings to other wallets under Michel’s control. Michel admitted the fraud in the community’s Discord channel under the pseudonym “James.”
Mutant Ape Planet exit scam?
He is due to appear before a US Magistrate Judge in the Eastern District of New York on Thursday afternoon.
This description fits the bill for a type of fraud known as rug pull or exit scam.
A rug pull is a crypto or NFT scam where a project creator or team abandons a project and takes all of the funds raised through the sale of tokens or NFTs with them. This can happen suddenly and without warning, giving the impression that the project creators have “pulled the rug out” from under their investors.
Rug pulls can be perpetrated through initial coin offerings (ICOs), initial exchange offerings (IEOs), or other fundraising events such as NFT sales. They can also occur with established projects that have already gained a following and are actively trading on exchanges.
Investors in rug pulled projects often lose significant amounts of money and may have little recourse for recovering their funds.
The news follows a recent report that the United States Securities and Exchange Commission has charged eight individuals and entities associated with the blockchain startup CoinDeal with fraud over a scheme to obtain client assets totalling $45 million.