Cheyenne Ligon is a CoinDesk news reporter with a focus on crypto regulation and policy. She has no significant crypto holdings.
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Regulators in five U.S. states issued emergency orders on Wednesday requiring a metaverse casino with alleged Russian ties to immediately halt the sale of its non-fungible tokens (NFT), citing fraud, deceit and registration violations.
The five states are Alabama, New Jersey, Texas, Kentucky and Wisconsin.
The Flamingo Casino Club began operating in Russia in March, regulators say, and has been soliciting investors through the sale of securitized NFTs.
Regulators say the Flamingo Casino Club operators took steps to conceal its connection to Russia, “using a phony office address, providing a telephone number that is not in service, [and] concealing its actual physical location and hiding material about its principals.”
According to an order filed by the Texas State Securities Board, the securitized NFTs give would-be investors partial ownership of the casino, a portion of the profits generated by the casino and the ability to enter into lotteries offering Teslas, iPhones and million-dollar cash prizes.
Potential investors were further enticed by what regulators say were fraudulent claims of association with the Flamingo Las Vegas Hotel and Casino, a legitimate casino, which regulators say has “no affiliation” or partnership with the Flamingo Casino Club.
Operators of the alleged scam promised investors their funds would be used to build a functioning casino and entertainment facility in the Sandbox metaverse. The plans included “a virtual stadium for virtual games and concerts, a virtual hotel, a virtual movie theater, a virtual bowling alley … [and] a virtual hockey team named ‘Flamingos,’” according to the orders.
Funds would supposedly be generated via gambling in the metaverse casino, where avatars would be able to play “craps, baccarat, minibaccarat, blackjack and roulette.”
Flamingo Casino Club’s operators told investors in April they were negotiating with rapper Snoop Dogg to purchase a plot of land in the Sandbox metaverse – but regulators say there is no evidence of this negotiation ever occurring.
Regulators say the Flamingo Casino Club operators never registered the sale of their securitized NFTs with the securities boards, and failed to respond to numerous inquiries.
Read more: NFT Scams: How to Avoid Falling Victim