Two California Men Charged in NFT Fraud Case That Caused $22M in Losses

Two Californians have recently been arrested in what is apparently the largest case of NFT fraud.

The US Department of Justice says 23-year-olds Gabriel Hay of Beverly Hills and Gavin Mayo of Thousand Oaks have been accused of running a series of million-dollar rug pull schemes that cost investors over $22 million in crypto.

The duo’s fraudulent ventures included projects such as "Vault of Gems," "Faceless," and several others, promising enticing features and returns that never materialized.

What is a Rug Pull?

In the NFT and cryptocurrency spaces, a “rug pull” is a type of scam in which project creators hype up a new digital asset, attract significant investments, then abruptly abandon the project. Investors are left with worthless assets and the scammers walk away with substantial profits.

The Indictment

According to court documents, from May 2021 to May 2024, Gabriel Hay and Gavin Mayo sponsored multiple NFT and digital asset projects, using promotional activities to attract investors. The accused allegedly made materially false and misleading statements about their projects, including providing fabricated “roadmaps” outlining plans they never intended to fulfill.

One example highlighted in the indictment involved the Vault of Gems NFT project, which they falsely claimed would be the “first NFT project to be pegged to a hard asset.” Instead of delivering on these promises, Hay and Mayo reportedly abandoned the projects after collecting millions from investors.

The elaborate scheme began to unravel under the scrutiny of Homeland Security Investigations (HSI).

“For three years, Hay and Mayo apparently lied to their investors in order to defraud them out of millions of dollars,” HSI Executive Associate Director Katrina W. Berger said. “Such technological fraud schemes cost investors millions of dollars every year. Just because such crimes aren’t violent does not mean they are victimless. HSI will continue to investigate, disrupt, and dismantle such cryptocurrency fraud networks.”

The Department of Justice’s National Cryptocurrency Enforcement Team (NCET), which targets crimes involving digital assets, is overseeing the case.

This indictment underscores the importance of vigilance in the crypto space. US Attorney Martin Estrada cautioned, “Whenever a new investment trend occurs, scammers are sure to follow.”

Hay and Mayo face multiple charges, including:

• Conspiracy to commit wire fraud and wire fraud, with each count carrying up to 20 years in prison.
• Stalking, carrying a maximum penalty of 5 years.

How to Safeguard Your Investments

While NFTs and cryptocurrencies offer exciting opportunities, they also attract fraudsters looking to exploit unsuspecting investors.

1. Conduct thorough research: Investigate the team behind an NFT project. Verify their credentials, past projects, and the feasibility of their promises.
2. Remain skeptical of any over-the-top claims such as projects offering unrealistic returns or unprecedented features without clear evidence
3. Monitor transparency: Legitimate projects maintain clear communication and deliver on milestones.
4. Stay up to date on trends and common scam tactics to avoid fraudsters exploiting emerging markets
5. Use security tools and reputable solutions to safeguard your digital assets, identity and money

For quick and on-the-go scam checks use:

·         Bitdefender Link Checker: A free tool that verifies URLs to help you avoid malware, phishing attempts, and counterfeit websites.

·         Bitdefender Scamio, our FREE scam-busting chatbot that helps you detect and avoid scams across multiple online platforms.

For comprehensive and award-winning protection, use specialized software like Bitdefender Ultimate Security that can help you dodge crypto scams, sketchy websites, phishing attempts, and many other cyber threats.