NFT Promoters Accused of $22 Million Rug Pull Fraud Schemes

Gabriel Hay and Gavin Mayo Arrested for NFT Rug Pull Schemes

Two California residents, Gabriel Hay and Gavin Mayo, have been formally charged for allegedly defrauding investors through a series of NFT rug pull schemes that drained $22 million from victims, according to recent court documents filed in Los Angeles.

The defendants are accused of creating misleading project roadmaps for a series of NFT projects between May 2021 and May 2024. The fraudulent projects included Vault of Gems, Faceless, Sinful Souls, Clout Coin, Dirty Dogs, Uncovered, MoonPortal, Squiggles, and Roost Coin. Each project claimed to deliver groundbreaking innovation in digital assets, attracting thousands of unsuspecting investors.

The pair, both 23 years old, allegedly orchestrated aggressive promotional campaigns for various NFT projects, leveraging social media and crypto communities. After collecting millions from investors, they suddenly abandoned the projects, prompting their arrest by Homeland Security Investigations (HSI).

"For three years, Hay and Mayo appear to have deceived investors to defraud them out of millions," said Katrina W. Berger, HSI Executive Associate Director. "These tech fraud schemes cost investors millions every year. Just because these crimes aren't violent doesn't mean there are no victims."

This case stands out as one of the most significant NFT rug pull schemes in recent history, underscoring the risks of the unregulated digital asset market. Investigators reported that the suspects used advanced techniques to hide their identities and move funds, including using multiple wallets and decentralized platforms.

Crypto Scammers Threatened the Project Manager

In a particularly troubling case, the alleged crypto scammers falsely claimed Vault of Gems would be "the first NFT project linked to a tangible asset." This claim drew in both institutional and retail investors seeking stability in the volatile NFT market. However, this statement was entirely false, intended solely to build trust and attract more capital.

The duo tried to conceal their involvement in the scheme by "falsely identifying others or arranging for others to be falsely identified as project owners." This tactic—using front men—is common in crypto fraud, making it harder to trace the real perpetrators and complicating legal proceedings.

When a manager from the Faceless NFT project threatened to expose Hay and Mayo’s involvement, the two Los Angeles-area natives harassed and intimidated the unnamed individual and their family. The harassment included threatening messages, online abuse, and sustained psychological pressure, causing significant emotional distress. This conduct further escalated the charges against them, adding harassment to their already serious fraud counts.

"Gabriel Hay and Gavin Mayo allegedly defrauded investors in digital asset projects of tens of millions and threatened an individual who tried to expose their roles in these fraudulent schemes," said Nicole M. Argentieri, Principal Deputy Assistant Attorney General and head of the Department of Justice’s Criminal Division.

"The department is dedicated to protecting investors and will continue working with law enforcement partners to root out fraud involving cryptocurrency and other digital assets and bring offenders to justice," she added.

Hay and Mayo each face one count of harassment, two counts of wire fraud, and one count of conspiracy to commit wire fraud. They face up to 20 years in prison for the conspiracy and wire fraud counts, plus an additional five years for harassment.

This case is a stark warning to the crypto community about the importance of thorough due diligence before investing in NFT projects. Experts advise verifying founder identities, evaluating the technical feasibility of project promises, and being skeptical of guaranteed returns or extraordinary claims. Authorities continue to intensify efforts to regulate the digital asset space and protect investors from similar scams.

FAQ

What is an NFT rug pull scam? How does it work?

A rug pull is a scam where NFT creators abandon their projects after raising funds, disappearing with investors’ money. These schemes work by building investor trust, hyping the project, then draining smart contracts and liquidity. Scammers often block sale transactions before vanishing.

How can you identify and prevent rug pull scams in NFT projects? What are the warning signs?

Watch for anonymous teams, low liquidity, promises of guaranteed returns, sudden contract changes, and dormant social media. Verify security audits, review transaction history, and look for an established community. Beware of urgent pressure to invest and projects lacking development transparency.

How can NFT fraud victims recover funds or seek legal remedies?

Victims can file complaints with regulatory agencies, consult attorneys specializing in cryptocurrency, join class action lawsuits, and report fraud to platforms to block suspicious addresses and recover frozen assets.

What are the legal consequences and penalties for participating in NFT rug pull scams?

Offenders may face charges of wire fraud, money laundering, and fraud. Penalties can include up to 20 years in prison, multimillion-dollar fines, and full restitution to victims. Federal authorities actively pursue these crimes.

What security factors should I consider when investing in NFT projects to protect my funds?

Verify the legitimacy of the project and its team, check for audited smart contracts, look for an active community, avoid guaranteed profit promises, and keep your private keys secure in personal wallets.