Five U.S. states simultaneously issued suspend orders on Metaverse casinos suspected of linking with Russia on Wednesday.
Five state securities regulators have issued an urgent order to the virtual casino, Flamingo Casino Club, to immediately stop selling non-fungible tokens.
Simultaneous filings from institutions in Texas, Wisconsin, Kentucky, Alabama and New Jersey accuse Flamingo Casino of “fraudulently recruiting” NFTs after it started operating in Russia this March.
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Metaverse Casino and Russia’s Relations
State law enforcement authorities claim that the online casino operator did not disclose ties to Russia and falsely claimed ties to a respected company.
As an incentive for holding NFTs, Flamingo Casino has provided NFT holders with metaverse concerts, tennis courts and poker tournaments.
“We give 50% of our casino revenue to NFT holders,” it says in the website graphic, providing an opportunity for NFT holders to earn passive income.
The regulator said in a press release that these NFTs “appear to be transferring ownership of Metaverse Casino and the right to share in Metaverse Casino revenue.”
The 22-page order against Flamingo Casino reveals the offering is "essentially a high-tech fraud." (Money Gate)
No office, no phone
The 22-page order form states that “this offer is essentially a high-tech scam.”
According to regulators, investors benefit when customers pay to play virtual craps, roulette, blackjack and other games that use avatars.
Regulators also allege that online casino operators used fictitious office locations and unusable phone numbers to conceal their ties to Russia.
Potential investors were further lured by false claims of affiliation with the legitimate casino, Flamingo Las Vegas Hotel and Casino.
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Fertile land for criminals
The civil action reflects a fresh and coordinated action by state authorities to control the situation that is shaping up after the phenomenal rise of the metaverse, where innovation and speculation have provided a fertile ground for criminals engaged in fraud and other illegal activities.
“You’re talking about digital assets and anonymous people hiding their whereabouts,” said Joe Rotunda, executive director of the Texas State Securities Commission.
“Once funds are moved, they may not be recoverable. Right? People can lose everything,” said Rotunda.
Flamingo Casino’s operator told investors in April that it was in talks with musician Snoop Dogg to acquire a block of properties from the Sandbox metaverse, but authorities say there is no evidence that such a deal has taken place.
Featured image from CNBC, chart from TradingView.com