The Department of Justice this afternoon announced criminal charges against the creator of the Baller Ape Club NFT collection for orchestrating a so-called “rug pull.”
The charges, announced alongside those in three other cryptocurrency fraud cases, mark the second time that federal prosecutors have gone after an NFT “rug-pull” scheme, in which an NFT project’s creators sell NFTs on false promises of community benefits and utility, only to abandon the project and make away with investors’ funds.
Le Anh Traun, a Vietnamese national, is charged with one count of conspiracy to commit wire fraud and one count of conspiracy to commit international money laundering.
Traun allegedly collected $2.6 million from Baller Ape NFT buyers, only to shortly thereafter delete the organization’s website and launder the funds. According to the Justice Department, he converted the ill-gotten gains into different cryptocurrencies and moved them across multiple blockchains, in a practice known as “chain-hopping.”
If convicted, Traun could face up to 40 years in prison.
NFT “rug pulls” are all too common in the high-volume, decentralized world of NFT trading, where new collections pop up daily from a slew of unheard-of creators. Last year alone, the NFT market generated $25 billion in sales. The Department of Justice, however, did not prosecute a single NFT fraud case in 2021.
Only in March of this year, when the DOJ announced its first ever case against an NFT creator for defrauding buyers (creators of the well known “rug-pull” NFT collection Frosties), did the federal government signal its willingness to pursue such cases. Today’s charges reaffirm that appetite.
“These cases serve as a crucial reminder that some con artists hide behind trendy buzzwords, but at the end of the day they are simply seeking to separate people from their money,” said U.S. Attorney Tracy L. Wilkison for the Central District of California, in a statement. “We will continue to work with our law enforcement partners to educate and protect potential investors about both traditional and trendy investments.”
The Baller Ape case, along with the three others announced today, are the product of a national enforcement action led by the DOJ in conjunction with the Department of Homeland Security and the FBI.
The other cases charged today include an alleged cryptocurrency Ponzi scheme that raised almost $100 million; a fraudulent initial coin offering that stole $21 million from misled investors; and an elaborate crypto commodities scheme that saw a man promise 600% returns to investors he wooed with meetings at Hollywood Hills homes he did not own, using a fake team of armed security guards to generate a false image of wealth and power.
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