Five US States Order Cease Sale of Casino NFTs in Metaverse Allegedly Linked to Russia

U.S. state regulators from Texas, Wisconsin, Kentucky, New Jersey and Alabama simultaneously filed orders against a virtual casino they allege has ties to Russia and operates in the metaverse, Flamingo Casino Club, which trades an affiliation with Caesars’ Flamingo Las Vegas. Hotel & Casino.

The situation follows a similar case last month in which Alabama and Texas halted sales of NFTs by the Cyprus-based Sand Vegas Casino Club. Following a civil suit, state law officials say the operators of the Flamingo Casino Club did not disclose their ties to Russia and reported that they had partnerships with legitimate companies, according to CNBC.

State securities boards in the five aforementioned states have filed a 22-page emergency cease-and-desist order outlining what they allege is false information from the Flamingo Casino Club and demanding that the group immediately stop the sale of its non-fungible tokens, or NFTs. . “The offer is simply a high-tech scam,” the order says.

NFTs are blockchain-based digital assets that designate ownership of virtual art, music or, in this case, ownership of a casino in the metaverse to whoever holds the NFT. In addition, each NFT has unique properties that cannot be replicated, proving its authenticity.

Casino began to be investigated in March

Investigators began examining the casino in March, shortly after it began operating, and say they were able to trace the people behind it to Moscow. Joe Rotunda, director of oversight at the Texas State Securities Board, a top official at the lead agency, told CNBC that the casino lured hopeful investors with false promises.

Virtual concerts, poker tournaments and tennis courts are just some of the perks listed on the organization’s website. The Flamingo Casino Club website also mentions to NFT holders that they would receive 50% of the profits generated by the casino as passive income. The deal further attracted customers, offering the chance to win exorbitant prizes like Teslas and iPhones in its random lotteries, according to its website.

The casino has also widely marketed its affiliation with a well-known gaming establishment, the Flamingo Las Vegas Hotel and Casino, to secure investor confidence. But the promises of profits and endorsements from big names were a Russian scheme to defraud investors. Something that was uncovered by a team of state regulators, according to the order.

Flamingo Casino Club is “intentionally failing to disclose its assets, liabilities, revenues and other financial information pertinent to its operations and the development and management of the casino,” according to the order.

The order says that while the casino sells securitized NFTs, it did not provide buyers with fundamental information such as a physical address, phone number or any evidence that would prove that the people on its leadership team actually existed.

A similar case occurred in Alabama and Texas.

Last month, state securities regulators in Alabama and Texas halted the sale of non-fungible tokens (NFTs) from a casino associated with a fraudulent investment scheme accused of violating state securities regulations. The company was found to be illegally offering unregistered securities and misleading the public.

The Texas State Securities Board has sent an Emergency Cessation and Waiver order to Cyprus-based Sand Vegas Casino Club and its founders Martin Schwazberger and Finn Ruben Warnke. The parties are accused of illegally offering NFTs to fund the development of virtual casinos in the metaverse.

Following the order aimed at the Sand Vegas Casino Cub, TSSB contacted the popular NFTs marketplace OpenSea to notify them that it is listing titles under state regulations without obtaining the necessary license. OpenSea has now suspended trading of these non-fungible tokens.