French NFT Fraudster Avoids Prison as Judge Questions Buyers' Losses

A French national who sought to exploit the frenzy for nonfungible tokens in 2022 by selling his “Mutant Ape Planet” digital assets avoided prison for defrauding buyers after a judge said it was difficult to determine how much they’d actually lost.

A French national who sought to exploit the frenzy for nonfungible tokens in 2022 by selling his “Mutant Ape Planet” digital assets has avoided prison for defrauding buyers after a judge said it was difficult to determine how much they’d actually lost.

Aurelien Michel, 26, pleaded guilty in November to wire fraud conspiracy, admitting he falsely promised thousands of NFT buyers “exclusive” benefits to boost the value of his neon-colored digital depictions of cartoon monkeys. Instead, he abandoned the project after he’d raised $2.9 million, prosecutors in the office of US Attorney Breon Peace in Brooklyn, New York said.

US District Judge Margo Brodie on Friday sentenced Michel to the one month he’d already served in a Brooklyn, New York, lockup after his arrest. She also imposed a $15,000 fine and ordered him to forfeit $1.4 million.

Federal prosecutors had sought a 37-month prison term, but Michel’s defense team argued losses tied to the fraud were overstated.

“The loss amount is unclear,” Brodie said. “There’s no question you and your co-conspirators ultimately gained or at least received $2.9 million from the project,” she told Michel. “But there is also no dispute everyone who purchased an NFT obtained or received something of value. What that value is, is unclear.”

Michel’s case is one of only three US criminal prosecutions over alleged fraud in NFT marketing and the first to reach sentencing, lawyers for both sides said after the hearing Friday.

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

Michel’s lawyers Ira Sorkin and Adam Brody had argued their client should be spared prison, insisting purchasers of “Mutant Ape Planet” NFTs received “digital artwork.”

An NFT confirms unique ownership of a digital asset. They were most popularly used for digital art or collectibles such as video clips, memes or items used in online games. At the height of crypto mania in early 2022, NFT series such as Bored Ape Yacht Club and CryptoPunks were fetching millions of dollars, fired up by endorsements from celebrities such as Paris Hilton and Snoop Dogg. By June of that year, prices of many NFT collections had collapsed.

Prosecutors said in a court filing that “the success of Bored Apes drove demand for other ape-related NFTs. Against this backdrop, the defendant and his co-conspirators began advertising a new NFT project called ‘Mutant Ape Plant’ or MAP.”

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

‘Rug Pull’ Scam

This type of maneuver is known as a “rug pull,” when developers raise funds and then disappear without making good on any promises, prosecutors said.

After purchasers realized they’d been duped, Michel said in a social media post under a pseudonym that he “never intended” to defraud anyone, but claimed the “toxic” behavior within the NFT community led to the rug pull, according to the government. Prosecutors said he and his co-conspirators intentionally abandoned the project after collecting investor funds.

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

Fraud scams tied to crypto are on the rise, in part because the decentralized structure of digital markets makes them appealing for criminals and difficult for authorities to retrieve lost funds, according to the FBI. Investors lost a record $5.6 billion in 2023, up 45% from a year earlier, the agency said in a report.

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

The case is US v. Aurelien, 23-cr-418, US District Court for the Eastern District of New York (Brooklyn).