Five US states order NFT sales halted by Metavers Casino with alleged links to Russia

At the same time, regulators in five states filed emergency orders Wednesday against a virtual casino that they say has ties to Russia and operates in the meta-verse, a digital world where participants can interact with each other, buy products and even play.

State law enforcement officials say Flamingo Casino Club operators have not disclosed their ties to Russia, claiming they have partnerships with legitimate companies while it has not. The civil case represents a new coordinated effort by state regulators to control some of what is happening in the midst of the metaverse’s explosive growth, where innovation and speculation have also provided fertile ground for criminals involved in allegations of fraud, theft and fraud.

State securities boards in Texas, Wisconsin, Kentucky, New Jersey and Alabama have filed a 22-page emergency stop-and-give order describing what they claim are false allegations from Flamingo Casino Club and demand that it immediately stop selling its non-fungal tokens or NFTs.

Source: Flamingo Casino Club

“The offer is simply a high-tech scam,” the order said.

NFTs are blockchain-based digital assets that indicate ownership of virtual art, music, or in this case ownership of a metaverse casino to the owner of the NFT. In addition, each NFT has unique properties that can not be duplicated, proving its authenticity.

Investigators began investigating the casino in March shortly after opening, saying they were finally able to track down the people behind it all the way to Moscow.

In an exclusive interview, the top official told CNBC that the casino lured hopeful investors with false promises.

“I was completely shocked,” said Joe Rotunda, director of enforcement at the Texas State Securities Board.

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 told NFT holders that they would receive 50% of the profits generated by the casino as passive income. It lured additional customers by offering a chance to win exorbitant prizes such as Teslas and iPhones in its random lotteries, according to its website.

Screenshot taken from Flamingo Casino Club’s website indicating that NFT holders are eligible for prizes such as Teslas and iPhones.

Source: Flamingo Casino Club

The casino also heavily marketed its affiliate with a well-known gaming company, Flamingo Las Vegas Hotel and Casino, to ensure investor confidence.

But behind the clever graphics, promises of profits and recognitions of big names, there was a scheme on the part of Russia to deceive investors, which a team of state regulators unraveled, the order reads.

Flamingo Casino Club “knowingly fails to disclose its assets, liabilities, income and other financial information relevant to its operation and the development and management of Metaverse Casino,” according to the order.

The order states that although the casino sells securitized NFTs, it did not provide buyers with basic information such as its physical address, telephone number or evidence proving that members of its management team actually existed.

Screenshot taken from Flamingo Casino Club’s website showing its management team. According to the order, the casino “does not provide sufficient information to allow investors to independently verify that David Aaronson, Waldo Lorenzo, Julia Munn and Sebastian Ruspoli actually exist.”

Source: Flamingo Casino Club

“You’re talking about digital assets and anonymous people hiding their location,” Rotunda said. “So once the money is transferred … we may not be able to get it back, right? It goes into a black hole through the blockchain and people can lose everything.”

Screenshot taken from Flamingo Casino Club’s website describing financial benefits for retail investors.

Source: Flamingo Casino Club

In addition to this murky money trail, the alleged partnership with Flamingo Las Vegas, a well-established casino on The Strip, was also fabricated, Rotunda said. The discontinuation and waiver order states that “the representations of Flamingo Casino Club are untrue” and the Las Vegas casino rejects any relationship.

But the fake partnerships do not stop there, according to the command. Flamingo Casino Club claims affiliation with Yahoo and MarketWatch, but there is no evidence to support a relationship with these companies, the order states.

“Flamingo Casino Club does not provide buyers with any information that reflects any relationship with Yahoo or MarketWatch,” the order states, adding that the casino provided hyperlinks to press releases distributed to Yahoo Finance and MarketWatch.

In its promotional video, Flamingo Casino Club announced plans to build the virtual casino on The Sandbox metaverse platform, but nothing has been built yet.

The casino’s management team wrote on Instagram that they had delayed the purchase of digital land due to ongoing negotiations with Snoop Dogg, who owns parts of the Sandbox property he plans to build on, according to the order and the casino’s own publications on social networks.

The ordinance states that the casino “willfully fails to disclose the status of negotiations for the purchase of virtual land from Snoop Dogg” as well as “the expected or expected cost of purchasing the virtual land.”

Through a series of lawsuits, regulators discovered that the Flamingo Casino Club’s IP address for the desktop and mobile device was registered in Moscow, further reducing the chances of investors seeing returns.

“Investors have to chase these ghosts to try to recover. And they will not recover if the money goes to Moscow,” Rotunda said.

In addition, Rotunda said casino operators began mobilizing the Flamingo Casino Club just as Russia invaded Ukraine and then announced to investors that some profits from their NFT sales would be donated to Ukrainian victims.

“And they were not just talking about how they would donate to Ukrainian civilians one or two people, they proclaimed it publicly,” Rotunda said. “I saw no money in favor of Ukrainians.”

Leave a Comment