Jury Finds Non-Fungible Token Developer Guilty Of Defrauding Investors And Laundering Proceeds Through Solana And Ethereum Blockchains

Tampa, Florida - United States Attorney Roger B. Handberg announces that a federal jury has found Berman Jerry Nowlin, Jr. (21, Huntsville, Alabama), a/k/a "Repulse" and "Zayous," guilty of conspiracy to commit wire fraud and money laundering. Nowlin faces a maximum penalty of five years in federal prison. Sentencing has been set for January 23, 2025.

According to evidence presented at trial, Nowlin and his codefendant, Devin Alan Rhoden (25, Pinellas Park, Florida), a/k/a "Denny" and "Deviinz," minted two non-fungible token (NFT) collections on the Solana blockchain named "UndeadApes" and "Undead Lady Apes" (representative samples from each collection are depicted below).

Nowlin served as the developer for both projects by, among other things, using an art engine to create the NFTs, managing the blockchain protocol, and coding the Solana smart contracts. Rhoden marketed the projects on Discord and X (formerly Twitter). In the weeks following the respective mints, the average sale price of both NFT collections increased dramatically. For instance, though minted at the cryptocurrency equivalent of $5, NFTs from the UndeadApes collection resold for the equivalent of $360 at their peak.

Nowlin and Rhoden used the success and enthusiasm from the first two collections to perpetrate a "rug pull," a cryptocurrency investment fraud scheme where developers abandon a project, take investor funds, and leave investors with a worthless asset. Specifically, in April 2022, Nowlin and Rhoden announced their intention to mint a third NFT collection named "Undead Tombstone." In the announcement and subsequent advertisements, Nowlin and Rhoden made exaggerated, misleading, and outright false statements to investors, including regarding utilities the NFTs would have, the amount of cryptocurrency that would be reinvested into the project, and partnerships with other prominent businesses. On April 19, 2022, Nowlin and Rhoden minted 632 Undead Tombstone NFTs before abruptly terminating the mint and executing the rug pull. A short time later, Nowlin and Rhoden deleted their Discord and Twitter accounts, cutting off all communication with investors.

The mint resulted in approximately $135,000 in cryptocurrency being sent to cryptocurrency wallets under the control of Nowlin and Rhoden. Using decentralized cryptocurrency tumbler Tornado Cash, Nowlin moved the fraud proceeds from the Solana blockchain to the Ethereum blockchain, also known as "chain-hopping." This confusion technique is used by cybercriminals and money launderers to make identifying and tracing illicit funds more difficult. Nowlin then used the cryptocurrency to purchase U.S. dollars and transferred that currency into his bank account. In a matter of weeks, the three NFT collections resulted in Nowlin and Rhoden receiving nearly $400,000 in cryptocurrency from hundreds of victim-investors all over the world.

"These cybercriminals concocted a scheme to defraud investors through a grand illusion and orchestrated a 'rug pull' to steal money from unsuspecting people, and laundered their ill-gotten gains though other cybercurrencies," said Homeland Security Investigations Tampa Assistant Special Agent in Charge John Dumas. "HSI Tampa, alongside our partners with the U.S. Air Force Office of Special Investigations and Department of Defense Office of Inspector General, Defense Criminal Investigative Service, and the Pasco Sheriff's Office this guilty verdict should serve as a stark reminder that criminals can easily exploit the allure of digital fortunes through would be cryptocurrency investments."

Rhoden pleaded guilty to conspiracy to commit wire fraud and money laundering on May 24, 2024. His sentencing hearing is scheduled for November 20, 2024.

This case was investigated by the U.S. Air Force - Office of Special Investigations, Homeland Security Investigations, Department of Defense - Office of Inspector General, Defense Criminal Investigative Service, and the Pasco Sheriff's Office. It is being prosecuted by Assistant United States Attorney Carlton C. Gammons.