Regulators in five U.S. states issued emergency orders Wednesday ordering a Metaversum casino with alleged Russian ties to immediately stop selling its non-fungible tokens (NFTs), citing fraud, deception and registration violations.
The five states are Alabama, New Jersey, Texas, Kentucky and Wisconsin.
Flamingo Casino Club began operations in Russia in March, regulators said, and has been soliciting investors by selling securitized NFTs.
Regulators say Flamingo Casino Club operators took steps to disguise their connection to Russia by using a false office address, providing a phone number that is not in service, [and] hiding their actual physical location and concealing material about their principals.
According to an order filed by the Texas State Securities Commission, the securitized NFTs provide potential investors with partial ownership of the casino, a share of the profits generated by the casino, and the opportunity to participate in lotteries offering millions of dollars in Teslas, iPhones, and cash prizes.
Potential investors were also lured by what regulators considered fraudulent claims of an affiliation with Flamingo Las Vegas Hotel and Casino, a legitimate casino that regulators said had "no affiliation" or partnership with Flamingo Casino Club.
The operators of the alleged scam promised investors that their funds would be used to build a functioning casino and entertainment facility in the Sandbox metaverse. The plans included "a virtual stadium for virtual games and concerts, a virtual hotel, a virtual movie theater, a virtual bowling alley ... [and] a virtual field hockey team called the 'Flamingos,'" the statement said.
The money is to be generated through gambling at the Metaverse casino, where avatars can play craps, baccarat, mini-baccarat, blackjack and roulette.
Flamingo Casino Club operators told investors in April that they were negotiating with rapper Snoop Dogg to buy a property in the sandbox Metaverse - but regulators say there is no evidence those negotiations ever took place.
Regulators allege that Flamingo Casino Club operators never filed the sale of their securitized NFTs with securities regulators and failed to respond to numerous inquiries.