Five state regulators in the United States have jointly moved towards clamping down on a metaverse project that has allegedly been defrauding investors through non-fungible tokens (NFTs). The project failed to reveal its previous ties to Russia, lied about the source and use of its funds, and misguided investors to accept profits from their ownership of a metaverse casino, authorities said.
In their joint announcement, the regulators warned investors against putting their money in the project they know little about, especially if these projects cling to flashy buzzwords like metaverse and NFTs.
The enforcement actions were filed by the Kentucky Department of Financial Institutions, New Jersey Bureau of Securities, Alabama Securities Commission, Texas State Securities Board, and Wisconsin Department of Financial Institutions.
Known as Flamingo Casino Club, the company allegedly began its operations in Russia in March, a fact authorities said the company was careful not to reveal at a time when the Vladimir Putin-led nation has come under global scrutiny for the war in Ukraine.
Further, it chose a name that resembled—and even claimed to be linked to—the Flamingo Las Vegas, a physical casino in Nevada.
“Although Flamingo Casino Club is touting its partnership with Flamingo Las Vegas, it actually has no relationship or affiliation with Flamingo Las Vegas,” regulators say.
The company states to be building a casino in the metaverse and is selling securitized NFTs tied to this casino. It argues that these NFTs are like shares in the project and that the owners will be entitled to passive income from all the profits it generates. NFT owners can also participate in lotteries and draws where they stand to win Teslas, iPhone 13s, and cash prizes of up to $1 million.
“Flamingo Casino Club is also concealing material information, including its address and location, the qualifications of its principals, the identities of its sales agents, and its use of principal paid by investors,” the watchdogs added.
Flamingo Casino has claimed that some of the funds it raises have gone to assist victims of the Russia-Ukraine war, which the regulators have disputed, as CNBC reports.
In an interview with the outlet, Joe Rotunda, the director of enforcement at the Texas State Securities Board, disputed the Ukraine links, saying, “And they didn’t just talk about how they were going to donate to Ukrainian civilians to one person or two people, they publicly proclaimed it. I haven’t seen any money going to benefit Ukrainians.”
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