DOJ Charges 2 NFT Scammers Over ‘Frosties’ Rug-Pull

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DOJ Charges 2 NFT Scammers Over 'Frosties' Rug-Pull Image

(US Department of Justice)

The US Department of Justice has charged two 20-year-olds, Ethan Nguyen and Andre Llacuna, with conspiracy to commit wire fraud and conspiracy to commit money laundering due to their efforts to scam NFT collectors out of an estimated $2.5 million worth of cryptocurrency.

The department says (Opens in a new window) Nguyen and Llacuna allegedly stole $1 million worth of cryptocurrency through a rug-pull scam—reveal a new crypto project, accept people’s money, and then disappear without ever releasing a product—involving a collection of NFTs known as Frosties.

As the DOJ explains, "Frosties purchasers would be eligible for holder rewards, such as. giveaways, early access to a metaverse game, and exclusive mint passes to upcoming Frosties seasons." Instead, the duo "abruptly abandoned the Frosties NFT project within hours after selling out of Frosties NFTs, deactivated the Frosties website, and transferred approximately $1.1 million in cryptocurrency proceeds from the scheme to various cryptocurrency wallets under their control in multiple transactions designed to obfuscate the original source of funds."

But it seems the pair wasn’t going to stop there. The DOJ says they were "preparing to launch the sale of a second set of NFTs advertised as ‘Embers,’ which was anticipated to generate approximately $1.5 million in cryptocurrency proceeds," before they were arrested.

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Both charges brought against the pair, conspiracy to commit wire fraud and conspiracy to commit money laundering, have maximum 20-year prison sentences.

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5 Tips for Blocking Mobile Tax Scammers

Phone and text scammers tend to target people by age and region. We explain who’s most vulnerable to these attacks and tell you what you can do to protect your information and money.

As a PCMag security analyst, I report on security solutions such as password managers and parental control software, as well as privacy tools such as VPNs. Each week I send out the SecurityWatch newsletter filled with online security news and tips for keeping you and your family safe on the internet.

5 Tips for Blocking Mobile Tax Scammers Image

Image by grinvalds/Getty Images

As if filing your taxes wasn’t stressful enough, tax season also means you must watch out for scammers who are trying to trick you into giving up your personal information and your money. You may have even received a slew of recent calls, emails, or texts from people posing as government officials or tax service representatives. According to research from RoboKiller (Opens in a new window) , there was a 24 percent increase in IRS and Social Security-related spam text messages between January and February of this year. These kinds of scams are unfortunately nothing new, and as PCMag senior security analyst Max Eddy writes, scammers got bolder during the COVID-19 pandemic and even started taking advantage of people receiving unemployment benefits from the U.S. government.

Who Is a Target for Tax Scams?

Anyone online can be a target of a tax scam if they don’t pay close attention to the messages they receive over the phone or via SMS. I recently discussed this particular phishing epidemic with Giulia Porter, a vice president at Teltech (Opens in a new window) . The company makes an app called RoboKiller, which is designed to block spam callers from reaching their potential victims.

Porter told me that though anyone can be a target, the elderly are usually the ones caught in the phishing nets. “Some of this technology, particularly texting, is somewhat newer and a little more unknown to older people. Scammers are obviously taking advantage of that,” she said. “Scammers also tend to target areas that have an older population. So for example, Florida, Texas, and more southern states tend to have a higher volume of spam calls.”

Tips for Protecting Yourself From Tax Scam Messages

There are ways to spot potential tax scams, but some may require you to change the way you interact with your mobile devices. Porter offered five tips for keeping safe online during tax time.

Consider the Method of Communication
U.S. government entities usually communicate with taxpayers via email or snail mail. The IRS even has a phishing warning page (Opens in a new window) that includes frequently asked questions about contact from the organization. Porter said the IRS and Social Security offices typically do not call or text private citizens. “Normally you won’t hear from the IRS or Social Security unannounced, “she said. “If there is an issue with your account, typically you’ll receive multiple forms of communication, such as mail that comes to your house notifying you of changes. Always remember that if the IRS is calling you out of the blue, it’s pretty unlikely that it is a legitimate call.”

Ignore Threats in Calls and Texts
Criminals often offer their victims a short period of time to pay up, counting on a victim’s ignorance of the tax process or fear of incarceration to get the crooks the money or information they seek. “Typically a scammer says something like, ‘If you don’t pay the taxes you owe, then you’ll go to prison in seven days,’" Porter said, "so if there’s any talk that’s really urgent within the call or text itself, make note of that.”

Stop Answering Calls and Texts From Unknown Numbers
I know it seems like a waste of a mobile phone plan, but Porter recommends that you don’t pick up the phone as often to answer calls from people you don’t know. Spam callers are prolific, and it may be easier to let the calls from numbers you don’t recognize go straight to voicemail.

Keep Your Info to Yourself
“Don’t provide any sort of personal financial information over the phone," Porter said. "For texts, we always recommend not replying. Don’t click on links.” Porter also noted that if you’re curious to see if other people received these texts, you can type the message verbatim into a search engine online. That said, just because the exact wording of the message doesn’t appear in search results doesn’t mean it isn’t a scam. Play it safe. Don’t reply and don’t click any included links.

Use an App to Block the Spam
Several apps in the Apple App Store and Google Play Store are designed to stop scammers before they can trick you out of your money or personal information. PCMag has a list of the best third-party apps for blocking unknown callers, including Hiya, RoboKiller, and Truecaller.

If you think you’ve been a victim of a tax-related scam, Porter had good news and bad news. “The FTC does allow you to file a complaint (Opens in a new window) with anything suspicious, whether that’s a robocall, a text, or an email. Unfortunately, and largely due to caller ID spoofing, robocalls and tax scams are basically untraceable. It’s very difficult to recoup lost funds from phone scams,” she said.

The best advice is to remain vigilant online and when using your smartphone. As always, I implore you to avoid giving out any personal information online or to anyone you don’t recognize over the phone. Good luck filing your taxes on time! The deadline is April 18. If you’re going to go down to the wire, you might want to read our story on Tax Tips for Last-Minute E-Filers.

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What Else Is Happening in the Security World This Week?

Ransomware Attacker Sentenced to 5.5 Years in Prison. The attacker was also ordered to pay $36 million in restitution.

Ukraine Doxes 620 Alleged Russian Spies by Publishing Names, Addresses. Ukraine claims it obtained a list of officers at Russia’s Federal Security Service (FSB), who’ve been engaged in malicious activities across Europe.