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DOJ convicts NFT creator in $400,000 rug pull scheme

DOJ convicts NFT creator in $400,000 rug pull scheme

GrafaGrafa2024/11/01 06:37
By:Isaac Francis

The U.S. Department of Justice announced that a federal jury in Tampa, Florida, has convicted Berman Jerry Nowlin, Jr., known as “Repulse” and “Zayous,” on charges of wire fraud and money laundering related to an NFT scheme that defrauded investors of nearly $400,000.

Nowlin, alongside codefendant Devin Alan Rhoden (“Denny” and “Deviinz”), launched NFT collections on the Solana blockchain titled “UndeadApes” and “Undead Lady Apes.”

According to the DOJ, the duo capitalised on the success of these collections to execute a “rug pull,” a tactic where developers abandon a project after obtaining funds, leaving investors with worthless assets.

Following the first two collections, Nowlin and Rhoden launched a third collection, “Undead Tombstone,” which they promptly abandoned, furthering their scheme and causing significant losses for investors.

DOJ records reveal that the “Undead Tombstone” minting event alone generated $135,000 in cryptocurrency, which the defendants allegedly moved across blockchains to conceal their actions.

Using Tornado Cash, a decentralised cryptocurrency mixer, Nowlin reportedly shifted funds from Solana to Ethereum, a process known as “chain-hopping.”

In addition to transferring the laundered cryptocurrency to his bank account, Nowlin converted part of the funds into U.S. dollars, ultimately reaping nearly $400,000 in proceeds from hundreds of global investors.

Rhoden pled guilty to related charges in May 2024, with his sentencing scheduled for November 20, 2024.

Nowlin, who faces sentencing on January 23, 2025, is expected to receive penalties aligned with the severity of the wire fraud and money laundering charges.

The DOJ’s swift legal actions reflect its ongoing commitment to cracking down on NFT and cryptocurrency fraud, signaling heightened scrutiny within the crypto investment landscape as authorities tackle such schemes more aggressively.

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