Department of Justice Charges Baller Ape Club NFT

  • NFT scams and rug pull are growing by their number.
  • NFT projects hit mainstream adoption in 2021 following the boom.

The Department of Justice has reportedly filed criminal charges against the creator of Baller Ape Club NFT collection for a suspected rug pull. A rug pull in crypto occurs when a project’s core team decides to abandon an already pumped project and removes or sells all its liquidity.

Rug pulls are becoming increasingly popular amongst NFT projects. The criminal charges against Baller Ape mark the second time authorities have investigated alleged rug pulls where project creators deceive their community by selling supposed valuable NFTs only to run off with investors’ money and abandon the project.

Reports state that authorities have gone after Vietnamese national Le Anh Traun who is accused of conspiring to conduct wire fraud on one count and international money laundering on another. Traun is charged with collecting $2.6 million from Baller Ape NFT purchasers before quickly deleting the company’s website and laundering the money. He transferred the illegally obtained gains into several cryptos and moved them around various blockchains. The Department of Justice claims that Traun may spend as much as 40 years in jail if found guilty. A statement from Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division read,

The Department of Justice and our partners are dedicated to using every available tool to protect consumers and investors from fraud and manipulation. These indictments reflect our deep commitment to prosecuting individuals involved in cryptocurrency fraud and market manipulation.

The Growing Cases of Rug Pulls in DeFi and NFTs

DeFi and NFT industries are always seeing the launch of new projects and similarly, these sectors of the crypto market are most vulnerable to attacks from scammers. Hackers on one side constantly feast on the loopholes in the system while the project creators sometimes launch with plans to rug pull after the project gathers steam.

It appears that for a while, the Department of Justice stayed calm on the events occurring in the DeFi and NFT scene. For example, the NFT market alone brought in $25 billion in revenue last year but despite this high volume, the Department of Justice didn’t bring any NFT fraud cases to trial. Authorities only showed their interest to prosecute these fraud cases this year after the Department of Justice announced its first charges against an NFT developer who was accused of ripping his community off.

The DOJ, along with the Department of Homeland Security, and the FBI,  jointly coordinated a nationwide enforcement initiative that resulted in the three other cases that were brought forward along with the Baller Ape case.

Other cases brought to court include an alleged crypto Ponzi scheme that garnered almost $100 million. The other case involves a fraudulent ICO that defrauded investors of $21 million. The third case involves a complicated crypto commodities scheme in which a man promised investors yields of 600 % while courting them with the impression that he was wealthy and powerful. The said scammer was alleged to have pulled tricks such as hiring a security team to help him appear rich and also fronting Hollywood homes he did not own.

The rise of scams in crypto means people have to learn how to protect themselves. Investors can safeguard themselves against fraud by picking well-known cryptocurrency projects, ensuring that the code of any new project has been vetted, and confirming the names of the creators.

Rug pulls are more frequent in new projects that haven’t been subjected to the same level of scrutiny as more established cryptocurrencies. Newer projects could include flaws that would allow their developers to steal value from investors.
Examining centralized exchanges like Binance, Coinbase, and FTX is one approach to uncovering proven initiatives. These companies frequently examine assets before listing them. However, inclusion on a significant exchange does not guarantee that the project would have investment potential or be of good quality.

Lawrence Woriji Verified

Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.

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