Two California men are accused of orchestrating a sprawling non-fungible token (NFT) scam that federal prosecutors say netted at least $22 million from unsuspecting investors, highlighting the dangers of the rapidly expanding market cryptocurrencies.
Observers note that the high-profile case – one of the largest NFT fraud prosecutions to date – could foreshadow potential repercussions for other controversial crypto projects, including the recent collapse of the “Hawk Tuah” coin. ” which left many investors claiming heavy losses.
Southern California indictment
According to the Department of Justice (DOJ), Gabriel Hay, 23, of Beverly Hills, and Gavin Mayo, 23, of Thousand Oaks, face charges of wire fraud and conspiracy to commit wire fraud. Their indictments, unsealed Friday in Los Angeles, allege that between May 2021 and May 2024, Hay and Mayo conducted several “rug pull” schemes involving NFT offerings on leading blockchain platforms, such as as Ethereum and Solana.
Prosecutors say the suspects lured investors with elaborate “project roadmaps” and assurances that the tokens sold would be backed by real assets or proprietary benefits. Instead, the two men reportedly abandoned the projects once they raised substantial capital, leaving thousands of investors with NFTs that quickly became worthless. Authorities identified projects with names such as “Vault of Gems,” “Dirty Dogs” and “Sinful Souls” among those allegedly misused to generate illicit gains.
If convicted, Hay and Mayo each face up to 20 years in prison for the wire fraud-related charges and up to five years for a separate stalking charge, which prosecutors say was raised when they allegedly harassed a project manager who attempted to expose their activities. . U.S. Attorney Martin Estrada pointed out in a statement that “any time a new investment trend occurs, scammers are sure to follow.”
Link to the “Hawk Tuah” controversy
Legal experts and consumer advocates say the SoCal case could serve as a warning to other high-profile crypto companies. including the recently collapsed Hawk Tuah coin. The $HAWK coin, promoted by social media celebrity Haliey Welch, best known for her viral catchphrase “Hawk Tuah,” launched on December 4 to much fanfare. Within minutes, its market capitalization reportedly soared to around $490 million on the Solana blockchain, only to plunge more than 90% shortly after, sparking outrage and allegations of “snipers” and inside profiteers .
Haliey Welch, Source:
Investors claimed they lost millions in the collapse, and at least one lawsuit was filed in New York federal court seeking more than $150,000 in damages. Although Welch herself is not named as a defendant, critics say her support on social media helped generate a “speculative frenzy” among inexperienced crypto buyers. In statements posted to X (formerly Twitter), Welch maintained her innocence and pledged to fully cooperate with any legal investigation on behalf of the affected investors.
Parallel models and key differences
The circumstances surrounding the Hawk Tuah play share certain thematic parallels with the allegations against Hay and Mayo. Both cases involve internet hype, an exponential increase in token prices, and a rapid downturn that left contributors with heavy financial losses. Consumer advocates point out that, much like the NFT scam described in the California indictment, the Hawk Tuah controversy also carried the promise of exclusivity and community rewards.
There are, however, crucial distinctions. While Hay and Mayo are accused of deliberately planning to abandon their projects after raising millions, Welch’s representatives insist his team retained their assets and has never attempted to “dump” or profit from the sale of $HAWK tokens. The influencer has not been accused of any wrongdoing but remains under scrutiny as investor lawsuits unfold to determine whether the meme coin offering violated securities laws.
Regulatory context
The U.S. Securities and Exchange Commission (SEC) and the DOJ have stepped up the fight against crypto-related fraud, forming specialized units like the National Cryptocurrency Enforcement Team (NCET) to combat illicit activities. As Hay and Mayo’s indictment demonstrates, federal authorities remain vigilant. “Fraudsters are taking advantage of new technologies and financial products,” said Principal Deputy Attorney General Nicole M. Argentieri, “and the Department of Justice is committed to prosecuting violators who exploit investor trust.”
In the case of the Hawk Tuah coin, the potential legal ramifications remain unclear. Industry observers suggest that, depending on what emerges from ongoing investigations, civil or criminal charges could follow if the evidence points to deliberate deception of investors. Meanwhile, Welch promised to help “uncover the truth” behind the room’s sudden collapse.