The United States Department of Justice (DoJ) announced on Thursday that it is charging three individuals from the United Kingdom for pulling off a rug pull scam through the sale of a collection of non-fungible tokens (NFTs) called “Evolved Apes.”

Mohamed-Amin Atcha, Mohamed Rilaz Waleedh, and Daood Hassan, three 23-year-old youngsters, are being accused by US authorities of committing wire fraud and money laundering. They allegedly stole $2.7 million from investors who bought these NFTs and received nothing in exchange.

Evolved Apes Creators Promised Investors a Videogame That They Did Not Deliver

According to the indictment unsealed on June 6th by the US Attorney’s Office for the Southern District of New York, the three British nationals collaborated to develop an elaborate scheme to defraud investors in late 2021.

Capitalizing on the NFT craze that reigned in the crypto space back then, they created and aggressively promoted the “Evolved Apes” collection of non-fungible tokens (NFTs) depicting cartoon ape images.

To entice investors, Atcha, Waleedh, and Hassan promised that they would develop a highly anticipated video game based in the Evolved Apes NFTs. They claimed that the funds raised from the sale of these NFTs would finance the game’s development and that the assets would increase in value over time once the game came out and its community of users started to increase.

However, as classic “rug pulls” often work, the defendants had no intention of fulfilling their promises. After accumulating millions in funding from NFT purchasers based on various locations, including the Southern District of New York, they abruptly shut down the project’s website and vanished with the ill-gotten proceeds.

“As alleged, the defendants ran a scam to drive up the price of digital artwork through false promises about developing a videogame. They allegedly took investor funds, never developed the game, and pocketed the proceeds,” commented US Attorney for the Southern District of NY Damian Williams in a press release published yesterday.

798 Ether (ETH) Tokens Stolen from Evolved Apes Investors

According to Williams, the defendants escaped with a total of 798 Ether (ETH) tokens in their possession, worth approximately $2.7 million at the time of the scam in late 2021. The proceeds were subsequently laundered through multiple cryptocurrency transactions that aimed to conceal their origins. Ultimately, the funds were transferred to personal accounts controlled by the individuals who are being accused by the Justice Department.

News of the Evolved Apes rug pull sparked outrage within the NFT community when the incident first came to light in late 2021.

Thousands of investors who had purchased the NFTs with the expectation of a forthcoming video game were left holding worthless digital assets after being propped up by the project’s founders.

In the aftermath of the scam, the Evolved Apes NFTs could still be traded on platforms like OpenSea but their price was substantially diminished by the project’s abandonment as they instantly became useless.

“Ghosting customers without fulfilling a promise not only reflects poor business integrity, it also violates the implicit trust buyers place in sellers when purchasing a product, no matter if that product is in a store or stored on a blockchain,” commented FBI Assistant Director in Charge, James Smith, about the charges.

The Three Fraudsters Face Up to 20 Years in Jail for Their Crime

https://twitter.com/SDNYnews/status/1798802566542721531

If the three individuals are found guilty, they face up to 20 years in federal prison for their crime and will be forced to give up any assets they may still possess from the scam to cover for investors’ losses.

“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,” US Attorney Williams stressed, delivering a stark alert to others who may believe that the perceived anonymity of the crypto world is enough to avoid being caught by authorities.

Also read: Was OneCoin’s Ruja Ignatova Murdered? Documents Implicate Mafia in the Scammer’s Death

The investigation is still ongoing with the assistance of both the FBI and the Southern District of New York’s US Attorney Office. Although the indictment is an important step to bring these individuals to justice, authorities in the North American country still face a steep road ahead to apply for the extradition of the three British citizens.

It may also be that, if any United Kingdom citizen was affected by the scam, authorities within the country may also charge Atcha, Waleedh, and Hassan for their crimes.

“The FBI remains committed to pursuing those who perpetrate fraudulent schemes out of a selfish desire for a quick profit,” Smith stressed about the agency’s actions to bring justice to a largely unregulated crypto space.

Rug Pulls Have Extracted Nearly $15 Billion from Investors Since 2011

The Evolved Apes case is yet another high-profile example of the growing issue plaguing this nascent industry – scammers and fraudsters who take advantage of the hype to siphon money from unwary investors.

According to data from De.Fi and its Rekt database, rug pulls alone are responsible for extracting nearly $15 billion in funds from investors across the globe since 2011 when their records started to be compiled.

Experts are constantly advising investors to proceed with caution during cycles of “exuberant irrationality”. One interesting parallel is taking place at the moment with the ongoing meme coin craze, where both celebrity-endorsed, fake, and anonymous projects are emerging at a fast pace with the assistance of drag-and-drop platforms like Pump.fun that make it easier for anyone to launch a meme token.

Also read: What Is a Crypto Rug Pull: How It Works and How to Avoid It

Many of these projects lack a roadmap regarding how they will be a community around them that increases the odds of their success. Also, their founders are usually unknown characters who hide behind a handle in a social media platform like X (formerly Twitter) or a messaging board like Reddit or Telegram.

Regardless, many investors are pouring their hard-earned money into these projects in the hope that others will follow them to the abyss. In some cases, they may make a quick buck if they manage to pull out before everything collapses but greed often gets the best out of them and they end up being caught up in rug pulls and plain old scams that end up draining their wallets.

As authorities around the globe keep struggling to keep up with the rapid pace at which these markets are evolving, cases like the Evolved Apes should deliver a stark warning about the dangers of being swept into the hype.

Investors who were affected by this scam are unlikely to receive anything near to what they lost as a lengthy legal process is still ahead to bring these criminals to justice.