Multiple state securities regulators on Wednesday filed simultaneous emergency orders against Flamingo Casino Club, a virtual casino operation accused of defrauding U.S. citizens.
The simultaneous filings, which came from agencies in Alabama, Kentucky, New Jersey, Wisconsin and Texas, accuse the Flamingo Casino Club of starting operations in Russia in March 2022 and “fraudulently soliciting” NFTs, or non-fungible tokens, which use blockchain technology to create “unique” versions of digital objects.
Those NFTs “purportedly convey ownership of a metaverse casino and the right to share in the profits of the metaverse casino,” the regulators said in a release.
“Investors purportedly profit when patrons, acting as avatars, pay to play virtual craps, blackjack, roulette, and other games,” the regulators explained.
While the club, in an effort to make itself more credible, alleged it was connected to the Flamingo Las Vegas, the regulators say that assertion is “simply false.”
“I was absolutely shocked,” Joe Rotunda, director of enforcement at the Texas State Securities Board, said of the scam in an interview with CNBC.
“You’re talking about digital assets and anonymous individuals who are concealing 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 may lose everything.”
The regulators urged the public to take caution as “metaverses,” or immersive, shared digital spaces on the internet, continue to garner more public interest.
“They are developing high-tech ploys to create a facade of legitimacy and deceive victims — while playing on their emotions by falsely promising lucrative profitability, guaranteed income, financial security, and the once-in-a-lifetime opportunity to become metaverse millionaires,” their release said.