The Federal Bureau of Investigation is set to use non-fungible tokens (NFTs) to return $1.14 million in funds to victims involved in a crypto fraud scheme that began with the launch of a sham project called CluCoin in 2021. 

According to an Aug. 21 statement from the US Attorney’s Office in Florida, 40-year-old Austin Michael Taylor pled guilty to wire fraud on Aug. 15 for routinely using investor funds intended for his CluCoin (CLU) project to fund his online gambling habit. 

The FBI will provide notice to “identified victims” of the planned restitution through their NFTs — marking one of the first times law enforcement has publicly stated it will use NFTs to contact victims.

The US Attorney’s Office also requested that anyone believed to be a victim in the fraud scheme provide relevant information to the FBI.

The CluCoin scheme explained

Taylor, better known by his online alias DNPThree, founded CluCoin in 2021, promising investors that the crypto scheme would have a “charitable focus.”

After raising funds, Taylor launched CLU by way of an initial coin offering (ICO) on May 19, 2021. 

Following the launch of CLU, Taylor shifted his focus to minting NFTs, developing new computer games, and even proposed launching a metaverse platform. 

According to court documents, Taylor organized a conference called “NFTCon: Into the metaverse” at a Miami hotel on April 4, 2022, to drum up further interest in CluCoin and its spin-off projects. 

Following the event, Taylor began making withdrawals from a crypto wallet, which controlled a portion of CLU investor funds. Between May and December 2022, Taylor funneled a total of $1.14 million worth of investor funds to his own accounts on various crypto exchanges before transferring these funds to online casinos. 

Taylor issued a public apology for his actions in Jan. 2023, saying that he became “incredibly addicted to gambling” and added that he was “deeply sorry” for misusing investor funds. 

FBI will use NFTs to contact victims of crypto fraud scheme Clucoin image 0

Taylor issued a public apology after losing investors' funds. Source: Reddit.

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Taylor agreed to pay back $1.14 million intended for victims’ restitution. 

Taylor will face sentencing on Oct. 31 and faces a maximum sentence of 20 years in jail for wire fraud. 

On Aug. 2, the FBI sent out a warning, asking web users to be vigilant of scammers pretending to be affiliated with crypto exchanges to steal users’ funds.

On June 4, the FBI also warned of a rise in work-from-home job advertisement scams involving crypto, where scammers provide the illusion of a lucrative job but are just a way to steal digital assets. 

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