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Five U.S. states order halt to NFT sales by metaverse casino with alleged Russia ties

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Source: Flamingo Casino Club

On Wednesday, five state regulators filed simultaneous emergency orders against a virtual gambling establishment they claimed had ties with Russia. This was in response to the fact that it operated in the metaverse (a digital realm where people can chat, play games, or purchase goods) and has also been linked to Russia.

Flamingo Casino Club operators claimed they had relationships with Russian businesses and failed to reveal Russian connections. State regulators have launched a joint effort in civil litigation to find out what’s happening amid explosive growth in the metaverse. This is where speculation and innovation provide fertile ground for criminals who are committing fraud, theft, and deception.

Texas, Wisconsin and Kentucky filed 22-page cease-and-desist orders naming Flamingo casino Club as the state securities board. They also demanded that Flamingo stop selling its non-fungible tokens.

According to the order, “The offer is simply high-tech fraud.”

NFTs can be described as digital assets on blockchain that identify the owner of virtual art or music. In this instance, it is also the owner of a metaverse online casino. Every NFT also has unique properties, which prove its authenticity.

In March of the first casino to open, investigators began to look into the matter and were able to track the culprits to Moscow.

CNBC spoke with the top agent who said that the casino had lured investors by promising false promises. 

Joe Rotunda (director of enforcement, Texas State Securities Board) stated that he was shocked.

The website lists a variety of perks, including virtual concerts and poker tournaments. Flamingo Casino Club website stated that NFT holders will receive 50% of all casino revenues as passive income. According to the website, it also offered patrons the chance to win extravagant prizes like iPhones or Teslas through its random lotteries.

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

Source: Flamingo Casino Club

To secure investor trust, the casino promoted its association with Flamingo Las Vegas Casino Hotel and Casino. 

However, behind the flashy graphics and promises of big profits was a scam out of Russia that defrauded investors. This scheme was discovered by a group of state regulators.

According to the order, Flamingo Casino Club “intentionally fails to disclose its assets and liabilities and any other financial information relevant to its operations, the development, and management of the metaverse Casino.” 

It was ordered that, even though the casino sold securitized NFTs to its customers, it did not provide basic information, such as the address and phone numbers of its owners or evidence that its leaders actually existed.

Screenshot taken from Flamingo Casino Club’s website showing its leadership team. According to the order, the casino is “failing to provide sufficient information to permit investors to independently verify that David Aaronson, Waldo Lorenzo, Julia Munn and Sebastian Ruspoli actually exist.”

Source: Flamingo Casino Club

Rotunda stated that Rotunda was referring to digital assets as well anonymous people who hide their locations. Rotunda said that once money has been transferred, it is possible to not get it back. The blockchain turns it into a black hole, where people could lose all their money.

Screenshot taken from Flamingo Casino Club’s website describing the financial perks to retail investors.

Source: Flamingo Casino Club

Rotunda claimed that in addition to the murky money trail the purported partnership was also falsified with Flamingo Vegas. This is a well-known, established casino, located on Las Vegas Strip. Rotunda said that the cease and desist order states that Flamingo Casino Club’s representations are “false” and that there is no relationship between them. 

The order states that the frauds don’t stop there. The order states that Flamingo Casino Club boasts of affiliations to MarketWatch and Yahoo, but the evidence is insufficient to support any such relationship. 

The order states that Flamingo Casino Club does not provide purchasers any information that could reflect a relationship with Yahoo or MarketWatch. It also adds hyperlinks to news releases sent to Yahoo Finance, MarketWatch and MarketWatch.

Flamingo Casino Club had in their promotional video that they were planning to create a virtual casino using the metaverse platform The Sandbox. But, it’s not yet built. 

In an Instagram post, the casino leadership stated that it had delayed the purchase of digital land as a result of continuing negotiations with Snoop Dogg. Dogg is the owner of a small portion of Sandbox, which it intends to develop, according to the order. 

It was alleged that the casino had “intentionally failed” to report the status of the negotiations for the purchase of virtual land from Snoopdogg, as well the “anticipated or projected cost” of the virtual land.

Regulators discovered through a series subpoenas that Flamingo Casino Club’s IP address and the mobile device registered to Moscow. This further reduces the chance of investors seeing returns. 

To recover, investors must chase these ghosts. Rotunda stated that they won’t recover if money goes to Moscow.

Rotunda also stated that Flamingo Casino Club was mobilized by casino operators around the time Russia invaded Ukraine. Later, they told investors that some of the NFT profits would go to the victims in Ukraine.

Rotunda explained that “they didn’t talk just about how they would donate to Ukrainian civils to one or two people. They publicly declared it.” I have not seen money benefiting Ukrainians.

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