Berman Jerry Nowlin Jr., creator of “Undead Apes” NFTs, has been found guilty of conspiracy to commit wire fraud and money laundering by a Florida jury. Nowlin and his co-creator made nearly $400,000 from the scheme, which piggybacked off the success of their previous collections to mislead investors.

“These cybercriminals concocted a scheme to defraud investors through a grand illusion and orchestrated a ‘rug pull’ to steal money from unsuspecting people, and laundered their ill-gotten gains though other cybercurrencies,” stated the Homeland Security Investigations’ assistant special agent in charge in Tampa.

In March 2022, Nowlin founded the “UndeadApes” and “Undead Lady Apes” (zombie-fied versions of the popular Bored Ape Yacht Club NFT series) with his co-defendant Devin Alan Rhoden, a web developer and active US Air Force officer. The 21 and 25 year olds proceeded to create a third NFT collection, dubbed “Undead Tombstone”, which they marketed with a litany of “exaggerated, misleading, and outright false” claims. It was allegedly abandoned on purpose after the co-creators extracted $135,000 in cryptocurrency of investors’ funds from the project. A total of $400,000 was extracted from the sales of all of their collections.

After leaving paying customers with a functionally worthless asset, the pair cut off all avenues for investor communication. They allegedly also used a decentralised blockchain called TornadoCash to further obscure the trail of cybercriminality.

Nowlin could face a maximum penalty of five years in federal prison for his part in the scheme, with his sentencing scheduled for 23rd January 2025. Rhoden pleaded guilty on 24th May to the same counts and will be sentenced on 20th November. The judge concluded the verdict “should serve as a stark reminder that criminals can easily exploit the allure of digital fortunes.”

Lawsuits relating to NFTs are beginning to rise as art-lovers and lawyers alike seek to define the legal and regulatory contours of Web3. This year alone, NFT holders have sued Eden Gallery; the artist Gal Yosef, the musician Jonathan Mann, and conceptual artist and lawyer Brian Frye filed a lawsuit against the US Securities and Exchange Commission regarding NFT regulation; and Nathaniel Chastain —a former employee of NFT platform OpenSea—was convicted of wire fraud and money laundering, which represented the “first insider trading” indictment in the Web3 sector.