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February 23, 2024Tampa, FL, United StatesFinancial Crimes

2 charged with NFT money laundering, ‘rug pull’ of digital blockchains

TAMPA, Fla. — A joint investigation has led to the return of an indictment charging two people with conspiracy to commit wire fraud and money laundering.

Devin Alan Rhoden aka Denny aka Deviinz, 24, of Pinellas Park, and Berman Jerry Nowlin Jr. aka Repulse aka Zayous, 20, of Huntsville, Alabama, each face a maximum penalty of five years in federal prison.

Rhoden was an active-duty senior airman stationed at MacDill Air Force Base as a cyber analyst.

Homeland Security Investigations (HSI) Tampa, the U.S. Air Force Office of Special Investigations, the Pasco County Sheriff’s Office, the Department of Defense’s Office of Inspector General, and the Defense Criminal Investigative Service investigated the case.

According to court documents, in March 2022, Rhoden and Nowlin minted two non-fungible token (NFT) collections on the Solana blockchain named “Undead Apes” and “Undead Lady Apes.” In the weeks following the mint, the average sale price of both NFT collections increased significantly.

In April 2022, Rhoden and Nowlin announced their intention to mint a third NFT collection named “Undead Tombstone.” In the announcement and subsequent advertisements, Rhoden and Nowlin made a number of material misrepresentations to attract victim-investors. On April 19, 2022, Rhoden and Nowlin minted 632 Undead Tombstone NFTs, resulting in approximately $135,000 in cryptocurrency being sent to wallets under their control. Rhoden and Nowlin then abandoned the mint without satisfying several of the representations made to victim-investors, commonly known as a “rug pull.”

Rhoden and Nowlin transferred the fraud proceeds from the Solana blockchain to the Ethereum blockchain, also known as “chain-hopping.” This obfuscation technique is used by cybercriminals and money launderers to make identifying and tracing illicit funds more difficult. Rhoden and Nowlin then used the cryptocurrency to purchase U.S. dollars and transferred the currency into their respective bank accounts. In a matter of weeks, the three NFT collections resulted in Rhoden and Nowlin receiving more than $300,000 in cryptocurrency from hundreds of victim-investors all over the world.

An indictment is merely a formal charge that a defendant has committed one or more violations of federal criminal law, and every defendant is presumed innocent unless, and until, proven guilty.

Assistant U.S. Attorney Carlton C. Gammons will prosecute the case.

HSI is the principal investigative arm of the U.S. Department of Homeland Security (DHS), responsible for investigating transnational crime and threats, specifically those criminal organizations that exploit the global infrastructure through which international trade, travel and finance move. HSI’s workforce of more than 8,700 employees consists of more than 6,000 special agents assigned to 237 cities throughout the United States, and 93 overseas locations in 56 countries. HSI’s international presence represents DHS’ largest investigative law enforcement presence abroad and one of the largest international footprints in U.S. law enforcement.