In an unprecedented development in U.S. history, the architect behind a notorious NFT “rug pull” scheme has been convicted of a federal crime, marking a potential turning point in the battle against fraudulent activities within the cryptocurrency space. Aurelien Michel, the 25-year-old founder of the ill-fated Mutant Ape Planet NFT collection, entered a guilty plea on Tuesday at a federal courthouse in Brooklyn, facing wire fraud charges.
NFT rug pull scammer committed fraud worth $3 million
The accusations center on his alleged conspiracy to commit wire fraud, resulting in the defrauding of Mutant Ape NFT holders of nearly $3 million. Michel now faces the prospect of up to five years in federal prison and has agreed to forfeit $1.4 million, according to the Department of Justice. This historic conviction unfolded when Michel was apprehended at New York’s JFK Airport in January, making his NFT project the third ever to be accused by federal authorities of executing a rug pull.
A rug pull is a scheme where creators sell NFTs with false promises of community benefits, utility, and financial perks, only to abandon the project and abscond with holders’ funds. Federal prosecutors revealed that Michel, a French citizen residing in the United Arab Emirates until his arrest, explicitly admitted to rug-pulling Mutant Ape Planet holders. Allegedly, he stated that they never intended to execute a rug pull, but the toxicity within the community compelled their actions. This admission followed the failure to fulfill promises of giveaways, merchandise collections, and tokens with staking features, initially guaranteed as perks of the NFT collection.
The ripple effect of scrutiny in the digital collectibles space
U.S. Attorney Breon Peace emphasized the significance of Michel’s guilty plea noting that with the guilty plea, Michel has confirmed that he conspired with others to defraud users eager to participate in a new digital asset market. Peace underscored their awareness of criminal actors exploiting the rapid pace of innovation in the digital asset space, and the investing public’s eagerness for cryptocurrency, to perpetrate large-scale frauds. Days after Michel’s arrest, evidence emerged linking him to other prominent NFT rug pulls: Fashion Ape NFT, which amassed $1.1 million from holders before disappearing.
He was also linked to Crazy Camels, which netted $1.6 million before vanishing. Notably, Michel has not faced charges in connection with either of these projects. The federal prosecutors had previously charged two other cases of NFT rug pulls before Michel’s arrest. The first involved the creators of the Frosties NFT project, and the second implicated the founder of the Baller Ape Club NFT collection. As of now, both cases appear to be unresolved. Decrypt reached out to the Department of Justice for updates on these cases but did not receive an immediate response.
The conviction of Aurelien Michel serves as a significant milestone in the ongoing battle against fraudulent activities within the NFT space. It sends a clear message to those seeking to exploit the growing interest in digital assets, highlighting the authorities’ commitment to pursuing and holding accountable individuals involved in deceptive practices within the cryptocurrency realm. This development may prompt increased scrutiny and regulatory measures aimed at safeguarding investors and preserving the integrity of the evolving digital asset market.