French National Receives Time Served for $2.9M NFT Fraud Scheme
On Friday, November 1, 2024, U.S. District Judge Margo Brodie of the Eastern District of New York sentenced Aurelien Michel, a 26-year-old French citizen, to time served in connection with a $2.9 million fraudulent scheme involving the marketing of “Mutant Ape Planet” non-fungible tokens (NFTs).
Michel, who had been living in Dubai prior to his arrest at a New York airport in January 2023, pled guilty last year to one count of wire fraud conspiracy, admitting his involvement in a “rug pull” scam where developers abandon their projects, leaving investors with worthless assets.
In addition to time served, Michel has agreed to forfeit $1.4 million and was fined $15,000. Prosecutors described how Michel and other developers launched the Mutant Ape Planet NFT collection in 2022, drawing inspiration from the popular Bored Ape Yacht Club series. They generated approximately $2.9 million in cryptocurrency by promising purchasers various benefits, including rewards, raffles, and access to other cryptocurrency assets linked to digital images of cartoon apes.
During the proceedings, Michel claimed that initial commitments were met, including a $500,000 marketing campaign and several giveaways leading up to the NFT launch. However, he stated that the team decided not to fulfill the remaining promises when the NFT market collapsed in March 2022. Judge Brodie acknowledged that the developers did not deliver as promised, noting that Michel and his co-conspirators exploited less-informed buyers.
Despite these admissions, Judge Brodie highlighted the significant uncertainty surrounding the actual financial losses suffered by the NFT purchasers, which influenced her sentencing decision. The judge emphasized that while the developers received $2.9 million, the NFT buyers had received some value, complicating the determination of losses.
The court heard extensive arguments from both the defense and prosecution regarding how to calculate the financial losses for sentencing guidelines. Prosecutors urged the court to view the loss as equivalent to the full $2.9 million received, arguing that the services promised were never delivered. Conversely, the defense contended that the loss should reflect the value of the benefits that were not provided, given that many purchasers managed to sell their NFTs on secondary markets for a profit.
Judge Brodie expressed difficulty in quantifying the loss, questioning how to evaluate the worth of unfulfilled promises. Defense attorney Adam Brody noted that the purchasers received something of value for their money, and many had successfully sold their NFTs, suggesting that the overall market decline was beyond the developers’ control.
Assistant U.S. Attorney Dylan Stern argued that the case was suited to use the gain from the offense as a measure for loss, given the challenges in determining an exact figure. Judge Brodie concurred, ultimately agreeing to utilize the $2.9 million figure for sentencing calculations while recognizing its limitations in accurately reflecting the situation.
In his statement to the court, Michel, through an interpreter, acknowledged his missteps and expressed remorse for the impact on the Mutant Ape Planet buyers, assuring the judge that he intended for this to be his first and last criminal conviction. Following his arrest, Michel spent nearly a month in custody and was released on a $1 million bond, backed by $250,000 in cash. He is now expected to face deportation.
