NFT Developers Plead Guilty to $400,000 ‘Rug Pull’, Laundering and Wire Fraud

One NFT developer has been found guilty and another has pleaded guilty to a U.S. court to conspiracy to commit wire fraud as well as money laundering, in relation to a NFT “rug pull” worth $400,000.

This comes following the sale of three NFT collections on Solana called “Undead Apes,” “Undead Lady Apes,” and the partial sale of “Undead Tombstone.” These collections minted for $5 a piece in 2022, bringing in $135,000 to wallets controlled by 21-year-old Berman Jerry Nowlin Jr. and 25-year-old Devin Alan Rhoden.

Over the following weeks, the total brought in by the scammers totalled almost $400,000 as hundreds of victims invested in the projects—with Undead Apes peaking at a price of $360 a piece.

The success of the projects was pushed by “outright false statements,” the Department of Justice (DOJ) report says. This included claims around future partnerships with “prominent businesses,” how much capital would be reinvested into the project, and details about utility that would be provided to holders.

In April 2022, just a month after the release of Undead Apes, the scammers started the mint of 632 “Undead Tombstone” NFTs which was abruptly stopped as the pair ‘rug pulled’ the projects. Namely the Discord and Twitter accounts were deleted as all communications were cut from the community.

As per the DOJ press release, this is considered a rug pull which they define as: “a cryptocurrency investment fraud scheme where developers abandon a project, take investor funds, and leave investors with a worthless asset.”

The pair used crypto mixer Tornado Cash, which is now banned in the U.S., to obfuscate where they were sending funds. The release highlighted the movement of funds between Solana and Ethereum, using a technique called “chain-hopping” to confuse those tracking them. The Alabama-based Nowlin then swapped the cryptocurrency for U.S. dollars and transferred the funds into his bank account.

On Thursday, it was announced that Nowlin was found guilty of conspiracy to commit wire fraud and money laundering in relation to the rug pulls. He now faces a maximum of five years in federal prison with his sentencing set for January 2025.

As for the Floridian, Rhoden, he pleaded guilty to conspiracy to commit wire fraud and money laundering in May 2024. His sentencing is set for later this month.

Edited by Stacy Elliott.