State securities regulators order virtual casino firm to stop selling NFTs
Reuters
Published Apr 13, 2022 03:35PM ET
Updated Apr 13, 2022 05:20PM ET
By Chris Prentice
WASHINGTON (Reuters) -Securities regulators in the U.S. states of Texas and Alabama on Wednesday ordered an online casino developer to stop selling non-fungible tokens (NFTs), alleging the firm was illegally offering unregistered securities and defrauding the public.
Cyprus-based Sand Vegas Casino Club and co-founders Martin Schwarzberger and Finn Ruben Warnke allegedly offered 11,111 NFTs in a "high-tech fraudulent securities offering" to fundraise to build virtual casinos in the metaverse. They also erroneously told potential buyers the tokens were not securities, the Texas State Securities Board said in a statement.
Sand Vegas promised buyers of its Gambler and Golden Gambler NFTs they would share in virtual casino profits, forecasting proceeds of as much as $81,000 each year, the regulators said.
Sand Vegas and the co-founders could not be reached immediately for comment.
The cease-and-desist order appears to be the first of its kind tied to internet-based virtual environment platforms, colloquially known as the metaverse. It also marks a new frontier for U.S. authorities seeking to clamp down on NFTs, blockchain-based tokens that represent assets such as a piece of digital art. Last month, two men were arrested and charged with scamming NFT buyers worth $1.1 million.
Though this latest case is relatively small, state actions often spark interest from federal regulators. NFTs have seen a surge in investor interest, and the Securities and Exchange Commission (SEC) has not yet offered formal guidance on whether they could be considered securities in some instances.
A spokesperson for OpenSea, the largest NFT marketplace, said the firm had disabled buying, selling and transferring of Sand Vegas tokens because the collections were in violation of the platform's service terms.
Joe Rotunda, enforcement director at the Texas State Securities Board, said the regulator has spotted a number of securities offerings in the metaverse.
"This is a hot area," he told Reuters. "We are coordinating among states to investigate the offerings and plan enforcement actions if necessary."
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.