On December 19, 2024, Berman Jerry Nowlin took his own life in Huntsville. The 21-year-old Alabama resident had been found guilty of federal wire fraud and money laundering charges in connection with a “rug pull” blockchain cryptocurrency fraud scheme and was awaiting sentencing. The scheme involved Nowlin and his co-conspirator, Devin Rhoden, creating a series of non-fungible collectible tokens, called “Undead Apes” and “Undead Lady Apes.” The duo ran two successful blockchain creations, and as anticipation was growing for the third collection, it was suddenly abandoned, leaving Rhoden and Nowlin with $135,000 and investors penniless. As cryptocurrency continues to emerge as an ever-growing investment channel, Nowlin’s story illustrates the potential dark side to these cryptocurrency markets.
Cryptocurrency first broke onto the investment scene in the 1980s, with American cryptographer David Chaum proposing eCash, an anonymous electronic money service. While Chaum’s service, Digicash, launched in 1989, it failed to reach the level of prominence cryptocurrency services see today. Twenty years later, in 2009, Bitcoin was launched by an anonymous person or group using the name Satoshi Nakamoto, illustrating the concept of decentralized digital currency. Early reactions to Bitcoin were mixed, with Forbes declaring Bitcoin the best investment of 2013, while Bloomberg declared it the worst investment of 2014. Widespread attitudes about cryptocurrency have continued shifting as Bitcoin and other digital coins have rose to prominence in the 2020s. In the last five years, the Securities and Exchange Commission (SEC) approved the first Bitcoin futures exchange-traded fund (ETF), along with 11 spot Bitcoin ETFs, with further expansion in this realm providing greater legitimacy for the entire asset class.
Blockchain, associated with digital assets, serves as the immutable decentralized digital ledger that stores, records, and verifies cryptocurrency data. The blockchain is comprised of a network of computers, which prevent modifications or alterations to the data. Each financial transaction is stored in a “block” in the blockchain. Each block is encrypted and chronologically chained to the prior block. The blocks contain stored data, along with a unique alphanumeric code, referred to as a hash, that serves as the “digital fingerprint” of the block. This set-up requires the consensus of the entire network to modify anything within the blockchain, providing a secure ledger for emerging and established cryptocurrency markets. While the technology is colloquially discussed in connection to cryptocurrency, blockchain has the potential to increase banking and medical record security and prevent supply-chain bottlenecking, among other purposes.
There are several recognized types of cryptocurrency crimes. Berman Nowlin’s “rug pull” represents one type of scheme in which project developers abruptly and deliberately abandon a startup once the developers have secured funds from investors. Similarly, some initial offers are entirely fabricated, and designed to scam would-be-investors. Cryptocurrency developers sometimes engage in “pump and dump” schemes, driving up the cost of their coin before selling at its artificial peak. Cryptocurrency markets are also ripe for manipulation through multiple different methods. Developers use spoofing, the making of fake orders, to artificially influence price. Traders will also practice “front-running,” in which a trader exploits access to information about pending transactions to jump ahead of large, market-moving transactions, effectively taking advantage of the price change. Finaly, traders will engage in “churning,” a practice in which traders excessively buy and sell cryptocurrency within a customer’s account without considering the customer’s investment goals to generate higher commissions. In addition to offenses that are more unique to cryptocurrency, this model can also be adapted to traditional financial crimes, including, but not limited to tax fraud, money laundering, bribery, and fraud.
In recent years, several high-profile cryptocurrency schemes have worked their way into public conversation, cementing cryptocurrency’s complicated place in our national conscience. In United States v. Bankman-Fried, No. S6 22 CR. 673 (LAK), 2024 WL 1506561 (S.D.N.Y. Mar. 29, 2024), FTX Founder Sam Bankman-Fried, commonly known as SBF, was sentenced to twenty-five years in prison last year for his role in a cryptocurrency scheme FTX, valued at $32 billion in January 2022, was a crypto exchange service. FTX’s largest customer, Alameda, was closely tied to Bankman-Fried, but Bankman-Fried maintained to investors that the operations were kept separately. In reality, a majority of Alameda’s assets were coins and tokens controlled by FTX, ultimately resulting in the costly collapse of both companies.
More recently, Hailey Welch, commonly known as “Hawk Tuah,” was entangled in controversy surrounding $HAWK. After going viral on TikTok in the summer of 2024, Welch began developing an online personal brand, including her own “Talk Tuah” podcast. Welch launched her coin, $HAWK, in early December 2024. Widely considered to be a “memecoin,” Welch’s popularity caused prices to skyrocket to nearly $500 million, before plummeting to $25 million by the next afternoon, amounting to a 95% loss. The incident inspired litigation, with a group of plaintiffs disputing their financial losses, accusing Welch’s team of illegally selling and promoting the coin as an unregistered security.
As demand for cryptocurrency continues to rise, the risk for developers and investors alike becomes increasingly evident. Individuals like Bankman-Fried, Welch, and Nowlin set out with the intention of driving investment, yet lost investors significant amounts of money, illustrating the volatility and dangers of the cryptocurrency market. Even well-intended developers may find themselves facing criminal charges, making it imperative for anyone charged with a criminal offense relating to this emerging area of law to seek the advice of an experienced and competent attorney.
If you have a Federal Criminal case, a State Criminal case, a Municipal Case or a Family Law case in the Northern District of Alabama, Middle District of Alabama, Southern District of Alabama, or any federal jurisdiction in the Eleventh Circuit, including Alabama, Florida, and Georgia, contact Joe Ingram or Ingram Law LLC at 205-825-LAWS. Get Relief * Get Results.