US government uses NFTs to sue scam group for $2.2M

This is the first time in the history of the crypto market that the government has used NFT technology to send subpoenas to anonymous scammers.

New York Attorney General Letitia James has filed a lawsuit to recover $2.2 million worth of stablecoins from a scam group that allegedly targeted New Yorkers.

The notable point in the lawsuit is that Ms. James will use NFTs (irreplaceable tokens) to legally notify the fraudulent group. This NFT will be airdropped directly into wallets controlled by the phishing team, containing a link to the Attorney General's Office website, which provides full information and documentation related to the lawsuit.

This is the first time a state or federal regulatory agency has adopted this method to send a legal notice.

The lawsuit describes fraudsters who use tricks to make friends with victims to extort money. Source: ny.gov.

As for the scam, this group of people used a sophisticated network targeting victims looking for remote employment opportunities to recruit them, promising to offer remote employment but requiring them to deposit stablecoins, such as USDT and USDC, into a wallet the group controlled.

The victims are convinced that the deposit is necessary to start work and receive wages. However, according to the lawsuit, the funds were not used for their intended purpose but were transferred directly to the fraudster's wallet.

Currently, $2.2 million in stablecoins have been frozen in wallets associated with the scam group. The lawsuit asks for the recovery of this amount along with damages and legal costs, and prohibits the fraudulent group from continuing to engage in similar behavior in the future.

Some victims like Ally, a hotel receptionist living in Nassau County and Mell, a 31-year-old teacher in Queens, were duped into losing more than $100,000 each. The scam bears many similarities to pig-butchering, a common form of fraud in 2024.

In this type, fraudsters often build complex relationships with the victim, playing the role of a lover or professional employer in order to extort large sums of money. When victims want to withdraw money, they are asked to send more money to fix the problem, causing the amount to be appropriated to increase.

The victim will be robbed of trust for a long time before the money is actually defrauded. Source: Investopedia.

Attorney General Letitia James also issued a warning to New Yorkers, urging them to be wary of messages from unidentified senders promising jobs or attractive investment opportunities.

She recommended that residents quickly report any fraud to her office for prompt assistance and prevention.

NFT technology will assist in informing the defendant of their full rights and obligations. Source: 99designs.

Under US law, in order to proceed with litigation, the suspect must be informed of the lawsuit, but with suspects on the blockchain, sending the notice in the traditional way (by mail or email) is not feasible due to the lack of contact information.

Instead, sending NFTs full of lawsuit information directly to the suspect's wallet ensures that the notice will be received in the right place, while meeting legal requirements for their right to know and protection.