CluCoin, launched by Taylor in 2021, was initially introduced as an innovation in the crypto world with the promise of providing ongoing revenue for community-chosen charitable projects.
However, a law enforcement investigation revealed that Taylor diverted investor funds to his personal account on a crypto exchange and spent the money on online gambling.
Taylor, known on Twitch as DNP3 with 242,000 followers, had claimed that CluCoin would fund charitable projects. Instead of using the funds for legitimate purposes, he squandered them on online gambling.
In legal proceedings, Taylor admitted to transferring $1.14 million of investor funds from CluCoin to his personal account. These funds were intended for the development of various CluCoin-related projects, not for gambling.
Further investigation revealed that Taylor did not disclose to investors his intention to use their funds for gambling activities until around January 3, 2023.
At that time, Taylor issued a public apology, acknowledging his misuse of the funds. This apology was seen as the first step in addressing the impact of his actions and providing clarity to the victims.
The U.S. Attorney’s Office for the Southern District of Florida announced that they will use NFTs to notify victims of the CluCoin fraud.
This is the first instance of NFTs being used in a law enforcement context to notify fraud victims. NFTs, which are unique blockchain tokens, will be used to send notifications to identified victims of the CluCoin project.
This technology is expected to facilitate communication and ensure that all victims receive the information they need.
However, some investors listed through CluCoin’s official Telegram channel have reported that they have not yet received NFTs from authorities.
Some have expressed frustration as the notification process appears slower than expected. One investor, Kevin, stated, “I personally lost just over $2,000, as well as the trust of several family members I persuaded to invest. This has been a humiliating experience.”
Another investor, Vlad, described the CluCoin community as “energetic and engaged” and expressed his trust in Taylor when the project initially showed potential.
However, after Taylor went off the radar, Vlad felt hopeless about recovering his investment. “If the FBI’s involvement could return something to me, I would be very grateful,” said Vlad. “But I don’t have high hopes of getting my $1,000 back.”
Federal authorities also noted that Taylor organized an event called “NFTCon: Into the Metaverse” in Miami in April 2022 to attract investors.
During the event, Taylor assured investors that funds allocated for CluCoin-related projects would be used for legitimate purposes. However, spending the funds on online gambling raised suspicions and eventually led to a legal investigation.
In a press release, Rafael Yakobi, managing partner of The CluCoin Founder Pleads Guilty to Wire Fraud, who has used NFTs in legal cases before, expressed satisfaction with the Southern District of Florida adopting this new method in law enforcement.
“This advancement underscores the importance of adapting legal practices to embrace new technologies,” said Yakobi. “We hope that the use of NFTs in this context will pave the way for further innovation in the legal system.”
Taylor is scheduled to be sentenced on October 31 before U.S. District Judge Jacqueline Becerra. If convicted, Taylor faces up to 20 years in prison.
The final decision will determine whether Taylor can reimburse the victims or not. This legal process highlights efforts in law enforcement to tackle increasingly complex crypto fraud cases by leveraging cutting-edge technology, marking a new step in how the legal system adapts to technological innovations.
