Regulators in Alabama, Kentucky, New Jersey, Wisconsin, and Texas filed a cease-and-desist order on Wednesday against a virtual casino company claimed to have fraudulently solicited non-fungible tokens (NFTs).
The Russia-tied group, Flamingo Casino Club, is accused of defrauding U.S. citizens with the blockchain technology used to create unique versions of digital objects, according to the outlet.
"The scheme is rooted in the metaverse — a term that generally refers to one or more interconnected virtual worlds that promote interactivity, entertainment, and commerce," the states said in a joint press release.
"Although metaverses are generating widespread public interest, bad actors are now leveraging the widespread public interest to perpetrate fraudulent investment schemes," they added.
During an interview with CNBC, Texas State Securities Board enforcement Director Joe Rotunda said he was "shocked" at the revelation when first approached with it.
"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."
"Investors have to chase those ghosts to try to recover. And they're not going to recover if the money is going to Moscow," he added.
Investigators had reportedly begun probing the casino in March, shortly after it launched, and said they quickly traced it to the Kremlin.
The order further claims the club has intentionally failed "to disclose its assets, liabilities, revenue, and other financial information germane to its operations and the development and management of the metaverse casino."
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