Virtual Casino with Russian Link Slapped with Cease-and-Desist Order by 5 States

Emergency orders against a virtual casino operating in the metaverse were filed simultaneously by five U.S. states after it was discovered that it had ties to Russia. The operators of Flamingo Casino Club did not reveal that it had such links to Russia and that it falsely claimed to have had partnerships with legitimate businesses, according to the state regulators.

This recent development marks a novel and coordinated policing of the growing metaverse industry, which has long been alleged to be a prominent space for criminals that are involved in fraud, theft, and deception. Securities boards in the states of Texas, Wisconsin, Kentucky, New Jersey, and Alabama were the primary proponents of the 22-page emergency cease-and-desist order against the Flamingo Casino Club.

“The offering is simply a high-tech scam,” stated the order. Investigation into the virtual casino was earlier launched in March just as it had begun operations. The probe quickly allowed the analysts to trace the operators of the Flamingo Casino Club to Moscow. Joe Rotunda, director of enforcement at the Texas State Securities Board, noted that he “was absolutely shocked” to find out about the link.

The Flamingo Casino Club offers virtual concerts, poker tournaments, and tennis courts alongside 50% of the casino’s profits to holders of its NFTs. It also hosted randomized lotteries which promised extravagant prizes including Teslas and iPhones. In an effort to capture the trust of its users, the virtual casino also marketed its affiliation with the Flamingo Las Vegas Hotel and Casino — which also turned out to be bogus. All of these, however, were part of a plot to defraud investors.

It was further elaborated that the Flamingo Casino Club was “intentionally failing to disclose its assets, liabilities, revenue, and other financial information germane to its operations and the development and management of the metaverse casino.” Despite the casino offering securitized NFTs, it failed to provide buyers with the necessary information like its physical address, phone number, or proof that the people on its leadership team existed.

“You’re talking about digital assets and anonymous individuals who are concealing their location,” added Rotunda. “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 virtual casino also publicized false affiliations with Yahoo and MarketWatch. “Flamingo Casino Club is not providing purchasers with any information reflecting any type of relationship with either Yahoo or MarketWatch,” the order stated.

The IP address for Flamingo Casino Club’s desktop computer and the mobile device was found to be registered to Moscow, after a series of subpoenas. “Investors have to chase those ghosts to try to recover. And they’re not going to recover if the money is going to Moscow,” said Rotunda.

Additionally, the virtual casino’s operators were mobilizing around shortly after Russia’s invasion of Ukraine and it promised investors that part of the profits from its NFT sales would go to Ukrainian victims. “And they didn’t just talk about how they were going to donate to Ukrainian civilians to one person or two people, they publicly proclaimed it. I haven’t seen any money going to benefit Ukrainians,” concluded Rotunda.

Source: CNBC