Mutant Ape Planet NFT scammer escapes jail in investor scam

A FRENCH national who tried to capitalize on the non-fungible tokens (NFTs) craze in 2022 by selling “Mutant Ape Planet” digital assets has been spared jail for defrauding buyers after a judge said it was difficult to determine how much they had actually lost.

Aurelien Michel, 26, pleaded guilty in November to participating in the fraud conspiracy, admitting that he falsely promised “exclusive” benefits to thousands of NFT buyers to increase the value of neon-colored digital depictions of cartoon monkeys. Prosecutors in U.S. Attorney Breon Peace’s office in Brooklyn, New York, said he abandoned the project after raising $2.9 million instead.

U.S. district judge Margo Brodie sentenced Michel on Friday, November 1, to one month in prison, which he served in a jail in Brooklyn, New York, following his arrest. He was also fined US$15,000 and ordered to forfeit US$1.4 million. Federal prosecutors had sought a 37-month prison sentence, but Michel’s defense team argued that the losses from the fraud were exaggerated.

“The amount of loss is unclear,” Brodie said. “There is no doubt that you and your accomplices ultimately earned or at least received US$2.9 million from the project,” he told Michel. “But there is no dispute that everyone who purchases an NFT is acquiring or receiving something of value. It is unclear what this value is.”

After Friday’s hearing, attorneys for both sides said Michel’s case was one of three criminal investigations opened in the U.S. alleging fraud in NFT marketing and the first to result in a criminal conviction.

Before being sentenced, Michel tearfully apologized to the judge and his victims. “This is my first criminal conviction and I promise you this will be my last,” he said.

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Michel’s attorneys, Ira Sorkin and Adam Brody, argued that their client should be spared prison, insisting that those who purchase “Mutant Ape Planet” NFTs receive “digital artwork.”

NFT verifies unique ownership of a digital asset. These were most commonly used for digital art or collectible items such as video clips, memes, or items used in online games. At the height of the crypto craze in early 2022, NFT series like Bored Ape Yacht Club and CryptoPunks were bringing in millions of US dollars, backed by celebrities like Paris Hilton and Snoop Dogg. By June of the same year, the prices of many NFT collectibles had collapsed.

“The success of Bored Apes has increased demand for other ape-related NFTs,” prosecutors said in a court filing. In this context, the defendant and his accomplices began advertising a new NFT project called ‘Mutant Monkey Factory’ or MAP.

According to federal prosecutors Drew Rolle and Dylan Stern, Michel’s crimes were a modern-day “get-rich-quick scheme” designed to capitalize on the NFT craze. They said he promised buyers rewards and benefits that never materialized, including the Mutant Ape cryptocurrency token, which he claimed would increase demand for their newly acquired assets.

‘Rug pulling’ scam

Such maneuvers, in which developers raise funds and then disappear without making any promises, are called “rug pulling,” prosecutors said.

After buyers realized they had been duped, Michel said in a pseudonymous social media post that he “never intended” to defraud anyone but claimed “toxic” behavior within the NFT community led to the cheating, according to the government. Prosecutors said he and his collaborators deliberately abandoned the project after raising investor funds.

Ultimately, investors purchased the NFTs for $2,900 each, which led to more than $2.9 million in cryptocurrency being transferred to two “digital wallets” controlled by Michel, according to the government. Michel was arrested upon arrival at John F Kennedy International Airport in New York in January 2023.

Crypto-related fraud scams are on the rise, in part because the decentralized nature of digital markets makes them attractive to criminals and makes it harder for authorities to recover lost funds, according to the FBI. Investors suffered a record loss of US$5.6 billion in 2023, up 45 percent from the previous year, the agency said in a report.

Federal investigators also linked Michel to other well-known NFT scams, including the “Fashion Ape” and “Crazy Camels” NFTs, according to Rolle and Stern. Michel and his collaborators abandoned NFTs after Michel and his collaborators sold more than $1 million in tokens each, prosecutors said. BLOOMBERG