Feds Arrest Alleged French NFT Fraudster at JFK Airport

A French national and expatriate living in the United Arab Emirates now faces fraud charges in the United States over an alleged knock-off of a popular ape-themed non-fungible token (NFT) project, federal prosecutors announced on Thursday.

Aurelien Michel, 24, stands accused of wire fraud in a criminal complaint unsealed on Thursday.

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According to a press release issued by the U.S. Attorney’s Office for the Eastern District of New York, the defendant was arrested on Wednesday evening at John F. Kennedy International Airport.

The 16-page criminal complaint does not specifically charge Michel with federal counts keyed to his alleged conduct. Rather, the filing cites the federal wire fraud statute, outlines a broad and so-called “rug pull” scheme, and asserts the defendant “engaged in the fraudulent conduct described [therein] and obtained proceeds of the fraud.”

While NFTs are controversial, even among the broader crypto community, the concept behind them is simple enough. Each NFT is minted by spending a particular amount of any given cryptocurrency and by uploading the image file that becomes the digital asset in question. Users also typically add identifying information to each NFT. Essentially, the process turns a piece of digital art into a public record stored on a public blockchain – a growing list of public records linked together by cryptography that cannot be altered once created.

The most common blockchain for NFT minting is the Ethereum network. And, according to federal law enforcement, that’s the blockchain used by Michel in his scheme to defraud investors who purchased nearly $3 million worth of “Mutant Ape Planet” NFTs.

The criminal complaint alleges that purchasers of the NFT were promised a “community focus” along with their investment that included, according to the project’s website and the official Discord chat affiliated with Mutant Ape Planet, a series of additional benefits.

According to the complaint, Michel allegedly advertised that the project would: (1) feature a $500,000 marketing budget to “support the Mutant Ape Planet NFTs and increase demand (and thereby the value) of the Mutant Ape Planet NFTs;” the launch of a merchandise collection featuring the artwork; the release of a separate token associated with the project for buyers that could be used to generate further investment returns on decentralized finance applications; a way to facilitate raffles and giveaways among the community; and promises “that the developers would acquire virtual land in the metaverse that would further benefit the NFT purchasers.”

Instead, federal authorities allege, the defendant took the money and ran – which is termed a “rug pull” in crypto parlance – by diverting the funds to various private cryptocurrency wallets.

“The representations made on the MAP Website and in the MAP Discord were false,” the complaint alleges. “The purchasers of the Mutant Ape Planet NFTs did not receive any of the promised benefits set out [by Michel]. Instead, the Mutant Ape Planet NFT project was a ‘rug pull,’ and the purchasers’ funds were diverted, in part, for the benefit of the defendant.”

The filing goes on to allege that Michel used the pseudonym “James” in Discord chats and eventually admitted to the fraud:

On or about June 4, 2022, “James | FOUNDER” posted a message to users in the MAP Discord channel that stated in relevant part: “We never intended to rug but the community went way too toxic. I recognize that our behaviour led to this…”

“Once the NFTs were sold-out, Michel allegedly ceased communications and withdrew purchasers’ funds from the company’s cryptocurrency wallets, lining his pockets with nearly $3 Million of investors’ money,” IRS Acting Special Agent-in-Charge Thomas Fattorusso said in the press release. “Michel can no longer blame the NFT community for his criminal behavior. His arrest means he will now face the consequences of his own actions.”

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In the criminal complaint, federal authorities allege that Michel was determined to be the person known as “James” through the use of an unidentified cryptocurrency exchange’s Know Your Customer information for an account allegedly linked to one of the cryptocurrency wallets used to drain the project’s coffers.

“As alleged, the defendant used a traditional criminal scheme to defraud consumers eager to participate in a new digital asset market,” U.S. Attorney Breon Peace said in the press release. “Protection from fraud and manipulation extends to all consumers and investors, including those participating in the fast-evolving market for NFTs and other crypto assets. Our Office is committed to bringing to justice any criminal actor abusing any markets for their own gain.”

Read the complaint and affidavit here.

[image via Eastern District of New York]

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