The Texan securities regulator has issued an emergency cease and desist order to a metaverse investment scheme it has accused of being fraudulent
The Texas Securities Commission is accusing Sand Vegas Casino Club, Martin Schwarzberger and Finn Ruben Warnke of illegally offering non-fungible tokens (NFTs) to create virtual casinos in metaverse venues like Sandbox, Decentraland, Infinity Void and NFT Worlds.
The Alabama Securities Commission has filed a simultaneous cease and desist as well.
Those named in the order have advised their followers that their Gambler NFTs and Golden Gambler NFTs are not regulated as securities and securities laws do not apply to NFTs. The Texas Securities Commission disagrees.
The commission claims the 11,111 Gambler NFTs constitute a fraudulent securities offering. Those who purchase the tokens receive a portion of the profits generated from the metaverse casinos they fund, which become sites for avatars to play casino games like poker using cryptocurrencies.
Those named in the cease and desist allegedly advertised the tokens as a means to turn a profit for investors, according to the order. They claimed holders would likely receive between $102 and $2,040 per NFT per month, among other claims. The Commission also alleges the group used other marketing strategies, like targeting social media influencers, webcasts, AMAs, airdrops and virtual lotteries through social media with prizes like Apple products and a Tesla car.
“The Respondents are not registered to sell securities in Texas, and the Gambler NFTs and Golden Gambler NFTs are not registered or permitted for sale in Texas,” said the Texas Securities Commission in a statement.