US Charges Three Individuals in Connection With the 2021 'Evolved Apes' NFT Rug Pull Scam

Evolved Apes was a collection of 10,000 unique NFTs that promised buyers a video game, which never materialized.

Three Individuals Charged in 2021 ‘Evolved Apes’ NFT Rug Pull Scam

The United States Attorney’s Office for the Southern District of New York has charged three individuals in connection with the 2021 “Evolved Apes” NFT rug pull scam.

Mohamed-Amin Atcha, Mohamed Rilaz Waleedh, and Daood Hassan were each charged with one count of wire fraud and one count of money laundering. The charges stem from a scheme to defraud purchasers of Evolved Apes NFTs by promising a video game that was never created.

According to the indictment, Atcha, Waleedh, and Hassan created the Evolved Apes NFT collection in May 2021. The NFTs were sold out in 10 minutes, generating 798 Ethereum (ETH), which was valued at approximately $2.7 million at the time.

However, a week after the launch, the anonymous developer known as “Evil Ape” disappeared with the funds. The indictment alleges that Atcha, Waleedh, and Hassan were involved in the rug pull scam and that they used the stolen ETH to purchase real estate and other assets.

“The defendants ran a scam to drive up the price of digital artwork through false promises about developing a videogame,” said U.S. Attorney Damian Williams. “They allegedly took investor funds, never developed the game, and pocketed the proceeds. Digital art may be new, but old rules still apply: making false promises for money is illegal.”

If convicted, Atcha, Waleedh, and Hassan each face a maximum sentence of 40 years in prison.

Rug Pull Scams in Crypto

In the crypto world, this type of scam is known as a “rug pull.” Developers raise funds, in most cases through token or NFT sales. After accumulating enough assets, they abruptly shut down the project and vanish with the money.

This is in contrast to a “pump and dump” scheme, where a group of bad actors artificially inflate the price of an asset through coordinated buying and shilling, and then sell their holdings at a higher price, leaving late buyers with the "bag" of overvalued assets.

According to DeFi’s Rekt database, over $79.7 billion has been lost to crypto bad actors since 2011. The largest rugpull listed is South African digital assets investment fund Africrypt, which disappeared with 69,000 Bitcoin (BTC), which was worth nearly $4.8 billion at the time in 2021.

The report follows a cryptocurrency trader recently losing $69 million in a sophisticated “address poisoning” scam. In this kind of scam, bad actors create fake accounts that are nearly identical to the victim’s online crypto address and send small amounts, hoping the victim accidentally sends money to the fake address later.

Cryptocurrency-related scams, including “pig butchering” scams, are becoming increasingly prevalent and costly for investors. At the end of last year, United States authorities were able to recover about $500,000 worth of assets lost to pig butchering scams.

In mid-March, Massachusetts prosecutors also took some steps to return $2.3 million worth of digital assets seized from fraudsters to pig-butchering scam victims.