In a groundbreaking move, the Federal Bureau of Investigation (FBI) has announced plans to use non-fungible tokens (NFTs) to notify victims of a $1.1 million cryptocurrency fraud scheme. The scheme involved a fake project called CluCoin, which was launched in 2021 by Austin Michael Taylor, better known online as DNPThree. This innovative approach marks one of the first times law enforcement has used NFTs to communicate with victims.

The CluCoin Scheme

CluCoin was introduced by Taylor with promises of a “charitable focus.” Investors were encouraged to buy into the project during its initial coin offering (ICO) on May 19, 2021. However, instead of delivering on his promises, Taylor diverted the funds for his personal use, primarily to support his online gambling habit.

After launching CluCoin, Taylor shifted his attention to other ventures, including minting NFTs, developing computer games, and proposing a metaverse platform. He even organized an event, “NFTCon: Into the Metaverse,” in April 2022 to generate more interest in his projects.

However, court documents reveal that between May and December 2022, Taylor withdrew $1.14 million from a crypto wallet containing investor funds and transferred the money to his accounts on various crypto exchanges. The funds were eventually funneled into online casinos, further fueling his gambling addiction.

FBI’s Use of NFTs for Restitution

Following his guilty plea to wire fraud on August 15, 2023, Taylor agreed to pay back the $1.14 million to the victims. The FBI plans to notify the “identified victims” of the planned restitution through NFTs, offering a unique and modern approach to victim communication in the digital age.

In January 2023, Taylor issued a public apology, admitting to his gambling addiction and expressing deep remorse for misusing investor funds. He is scheduled to be sentenced on October 31 and could face up to 20 years in prison for wire fraud.

FBI’s Ongoing Warnings

The FBI has been proactive in warning the public about various crypto-related scams. On August 2, the agency issued a warning about scammers posing as representatives of crypto exchanges to steal funds. Additionally, in June, the FBI cautioned against work-from-home job scams involving crypto, which are designed to deceive individuals and steal their digital assets.

The FBI’s decision to use NFTs to notify victims of the CluCoin fraud scheme reflects the agency’s adaptability in addressing the challenges posed by digital crimes. As cryptocurrency scams continue to evolve, law enforcement is finding new ways to protect and inform the public.