On January 9, 2022, the anonymous creators of a sold-out NFT collection called Frosties abruptly abandoned the NFT project, deactivated the Frosties website, and transferred all 356.56 ETH, approximately $1.1 million in cryptocurrency proceeds, to various cryptocurrency wallets under their control in multiple transactions designed to obfuscate the original source of funds.
U.S. law enforcement began the investigation following public reports by purchasers of the NFT project that they had been “rug-pulled,” meaning that the Frosties project creators had ended the project prematurely and taken the purchasers’ money.
Next-Gen Web3 Blockchain Analytics
AnChain.AI, the Next-Gen Web3 Blockchain Analytics, analyzed the smart contract addresses and verified the wallet addresses belonging to the creators of the Frosties NFT project via OSINT (open-source intelligence) verification, which refers to the collection and analysis of data gathered from open sources about an individual or organization.
Using AnChain.AI’s CISOTM Auto-Tracing investigation and dark web intelligence, AnChain.AI promptly identified and tracked the flow of Frosties NFT sale proceeds to Tornado Cash, a Zero-Knowledge Proof-backed cryptocurrency transaction mixer that scrambles the funds of multiple users to ensure that any withdrawals from the Tornado Cash smart contract cannot be linked to the original depositing address.
This AnChain.AI graph shows $1.1 million worth of Ethereum transferred from the wallet addresses belonging to the Frosties project creators to Tornado Cash between January 9, 2022, and January 16, 2022.
On March 24, 2022, the US Department of Justice announced two defendants have been identified and charged in Non-Fungible Token (“NFT”) fraud and money laundering scheme for the $1.1 million Frosties NFT rug pull scheme.
Read the full DOJ release here.
AnChain.AI is an AI-powered cybersecurity company enhancing blockchain security, risk, and compliance strategies. AnChain.AI was founded in 2018 by cybersecurity and enterprise software veterans from FireEye and Mandiant. Backed by both Silicon Valley and Wall Street VCs, and selected in the Berkeley Blockchain Xcelerator, the company is trusted by 100+ customers from over 10+ countries in these sectors: VASPs, financial institutions, and government, including the U.S. SEC (Securities and Exchange Commission). Featured by CBS News, MIT Tech Review, Coindesk, and DEFCON, AnChain.AI’s AML engine screens over $1 billion in daily crypto transactions.