Feds Will Contact Victims of Million-Dollar Crypto Scam 'via NFT’ After Founder's Guilty Plea

Federal authorities in Miami said Wednesday that victims of the cryptocurrency project CluCoin on BNB Chain will receive notices via NFTs—that is, unique blockchain tokens—after the project’s co-founder pleaded guilty to wire fraud in federal court.

Austin Michael Taylor, who launched CluCoin (CLU) in 2021, admitted to transferring $1.14 million worth of investor funds to a personal account at a crypto exchange. Raised through the project’s ICO, the funds were earmarked for developing CluCoin-related projects, but Taylor later gambled them away across several online casinos, according to law enforcement.

Taylor streamed on Twitch under the username DNP3, amassing 242,000 followers on the platform. Leveraging his existing social media accounts, Taylor initially told investors that CluCoin would “provide an ongoing income for charitable projects” chosen by the community. The project’s focus later shifted to developing a video game and metaverse platform.

“Taylor never disclosed to investors that he intended to and had gambled away CLU investor funds until on or about January 3, 2023,” prosecutors alleged in July. “Taylor issued a public apology [at that time] admitting that he had wrongly gambled investor funds away.”

In a press release, the U.S. Attorney’s Office for the Southern District of Florida said that CluCoin’s “identified victims will be notified via NFT.” Across all DOJ notices, it represents the first time that NFTs will be used to establish law enforcement communications with victims.

Decrypt reached out to the FBI and DOJ seeking clarification on how the process will take place, but it did not immediately hear back. Several investors found through the project’s official Telegram channel additionally told Decrypt that they had not yet received NFTs from authorities in wallets they had used to invest in CluCoin.

“I personally lost just over $2,000, as well as the trust of several family members who I talked into getting some,” said a CLU investor named Kevin, who declined to provide his last name. “It’s just been a humiliating ordeal.”

A CLU investor named Vlad, who also declined to provide his last name, described CluCoin’s community as “energetic and engaged.” He said he trusted Taylor after the “project took off nicely” and followed CluCoin closely before Taylor “suddenly went below the radar.”

Three months after CluCoin launched, its market capitalization peaked at $17 million. Today, CLU’s total value is around $62,000, with less than $5 in trading volume over the past day.

“If the FBI involvement would bring me back anything, I would be grateful,” Vlad said. “But I don’t have high hopes of ever getting my $1,000 back.”

NFTs have been used in at least one U.S. court case before, as a way to issue a formal legal notice. Last year, The Crypto Lawyers served hackers who swiped $970,000 from someone’s self-hosted wallet, using NFTs to convey official court documents.

“We are pleased to see the Southern District of Florida is advancing the legal framework by building upon the precedent set in our landmark case,” Rafael Yakobi, The Crypto Lawyers’ managing partner, told Decrypt. “This progress underscores the importance of adapting legal practices to embrace emerging technologies.”

Prosecutors alleged that Taylor hosted an event called “NFTCon: Into the Metaverse” at a Miami hotel in April 2022 to attract investors. He also made assurances that funds diverted to the wallet for CluCoin-related projects would be used for legitimate purposes, prosecutors said.

“He accepts responsibility,” Taylor’s attorney, Benjamin Ryan Stechschulte of Stechschulte Nell, told Decrypt in a statement, adding that Taylor “has no further comment.”

The DOJ said that Taylor faces up to 20 years in prison for his wire fraud conviction in the aforementioned news release. The developer and streamer is scheduled for sentencing on October 31 before U.S. District Judge Jacqueline Becerra.

Edited by Andrew Hayward