Regulators in five US states have issued cease-and-desist orders for a digital casino that has links to Russia marketing NFTs to Americans.
Emergency orders were issued from five state securities regulators to halt the sale of NFTs, a virtual casino offering with alleged ties to Flamingo Casino Club, Yahoo and Marketwatch. NFTs are digital certificates of authenticity for virtual or physical assets purchased using cryptocurrency. They are irreversibly recorded on a blockchain such as Ethereum. While NFTs can be purchased and collected in the same way that works of art are in the physical world, sometimes owning NFTs provides a special privilege and opportunity to belong to a specific online community.
NFT owners of Flamingo Casino Club were offered virtual concerts, poker tournaments and tennis courts for owning NFTs. “We distribute 50% of the profits generated at our casinos to our NFT holders,” reads a graphic on the website, offering NFT holders a way to earn passive income. Entering the lottery promised a chance to win big-ticket items like Teslas and iPhones. Enforcement majors at the Texas State Securities Board were swayed by the abundance of false promises made to investors. “I was absolutely shocked,” said Joe Rotunda.
“You are talking about digital assets and anonymous individuals hiding their location,” Rotunda said. “So once the money is transferred … we may not be able to get it back, right? … people can lose everything.”
When did the regulators smell the rat?
In March, investigations began at the casino shortly after the casino opened its virtual doors. Shortly thereafter, links to Moscow emerged, as investigators traced the IP addresses of computers and mobile devices connected to a virtual casino belonging to Moscow. Rotunda said it would be difficult to trace any lost funds because of this. “… they’re not going to recover if the money is going to Moscow,” said Rotunda.
Furthermore, the website did not contain any physical picture of the management nor did it provide any physical address. Partnerships with a physical casino of a similar name on the Las Vegas Strip and financial news outlets Yahoo and Marketwatch all proved fictitious.
The online Metaverse casino made exaggerated claims about donating money to Ukrainians besieged by the Russian invasion on February 24, 2022. “I haven’t seen any money to benefit Ukrainians,” Rotunda said.
Regulators on hand to completely curb unregistered NFTs as securities
The Flamingo order is the second enforcement action issued by the Texas, Alabama and Kentucky securities regulators in less than a month. Last month, he also called on an online casino developer in Cyprus to present NFTs as unregistered securities. The NFTs were called “gamblers” and “golden gamblers” and were offered with the promise of shares in casino profits up to $81,000 per year.
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