Five US States Issued Order to Stop a Fraudulent Russian Metaverse Project

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Five US states announced plans to take imme­di­ate action against a Russ­ian orga­ni­za­tion alleged­ly sell­ing fraud­u­lent NFTs to US investors for fund­ing a meta­verse casi­no called Flamin­go Casi­no Club. The author­i­ties required the enti­ty to stop sell­ing such dig­i­tal assets, accus­ing it of com­mit­ting fraud and sell­ing unreg­is­tered securities.

Fraudulent Claims

Secu­ri­ties Reg­u­la­tors from Alaba­ma, Ken­tucky, New Jer­sey, Wis­con­sin, and Texas said that Flamin­go Casi­no Club had solicit­ed unlaw­ful invest­ments since it start­ed oper­at­ing from Rus­sia in March. The project promised investors lucra­tive prof­its through the sale of the NFTs – which act­ed as the proof of own­er­ship of items and lands in the vir­tu­al casino.

Texas State Secu­ri­ties Board’s order indi­cat­ed that the secu­ri­tized NFTs mis­led investors with the so-called oppor­tu­ni­ties to earn prof­its gen­er­at­ed by the vir­tu­al casi­no and enter into lot­ter­ies that offered lucra­tive prizes like Tes­las, iPhones, and mil­lions of dol­lars of cash.

Accord­ing to the joint state­ment by reg­u­la­tors, Flamin­go Casi­no Club has pro­mot­ed numer­ous fal­si­fied claims for scam­ming peo­ple to buy their NFTs. The project claimed it had a part­ner­ship with the Neva­da-based casi­no Flamin­go Las Vegas, but it lat­er proved that there was no such affil­i­a­tion. The action also found out that the Club even lied that it had part­nered with Yahoo and Mar­ket­watch with the pur­pose of val­i­dat­ing its scheme.

Oper­a­tors of the alleged scam promised investors their funds would be used to build a func­tion­ing casi­no and enter­tain­ment facil­i­ty in The Sand­box. To fur­ther entice poten­tial investors to get on board, the project tweet­ed that it had nego­ti­at­ed with famous rap­per Snoop Dogg to pur­chase some of his vir­tu­al lands, but reg­u­la­tors refut­ed such a fraud­u­lent claim.

“The Tip of the Iceberg”

Many online scam­mers tend to remain anony­mous in case of “going dark” when­ev­er their projects are exposed as a fraud.

The Club also chose such a tac­tic, the reg­u­la­tors not­ed, by “using a pho­ny office address, pro­vid­ing a tele­phone num­ber that is not in ser­vice, con­ceal­ing its actu­al phys­i­cal loca­tion and hid­ing mate­r­i­al infor­ma­tion about its prin­ci­pals.” Besides, the team also con­cealed their true iden­ti­ties and their con­nec­tion to Russia.

The reg­u­la­tors accused the project of “devel­op­ing high-tech ploys to cre­ate a facade of legit­i­ma­cy and deceive vic­tims” and warned that the lat­est fraud had only account­ed for a tiny part of rel­e­vant crimes in the meta­verse space:

“We are uncov­er­ing an increas­ing num­ber of sus­pect solic­i­ta­tions for unreg­is­tered secu­ri­ties tied to the meta­verse. Today’s action may well be just the tip of the iceberg.”

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