- Four U.S. states issued cease and desist orders against virtual casino Slotie over an alleged illegal investment scheme
- The virtual casino is accused of defrauding investors through its NFTs
- Regulators have warned investors of the significant risks involved in investment products linked to the metaverse
Virtual casino Slotie has been ordered to terminate its operations for allegedly running an illegal gambling business in the metaverse, a virtual world where people live, work, play, shop, gamble, and socialize with each other.
Slotie Accused of NFT Fraud
State securities regulators in Alabama, Texas, Kentucky and New Jersey have issued emergency cease-and-desist orders against Slotie, accusing the metaverse casino of defrauding investors through the sale of its non-fungible tokens (NFTs) which it described on its website as “your ticket into the largest and fastest growing online casino network on the blockchain“.
Slotie would entice investors by telling them they can obtain ownership interests in the casinos and the right to share in the casinos’ profits.
In the coordinated orders, the four states alleged that Slotie employed dirty tactics to attract investors, such as telling them they’ll earn more passive income when they buy Slotie NFTs with “rarer traits“. Investors have also been allegedly issued with the Ethereum-based token WATT.
In promoting the NFTs, the virtual casino told investors that each Slotie NFT produces 10 WATTs per day, and that owning 2 Slotie NFTs and 1,800 WATTs would enable them to mint a new NFT under a process called “breeding“. Slotie has so far sold 10,000 NFTs, according to the state regulators.
By promising passive income to retail investors, Slotie NFTs essentially work like stocks. However, they are not registered as such, the regulators said. The virtual casino also allegedly concealed its assets and liabilities and failed to provide clear information regarding the identity of its partner casinos and the potential risks of investing in metaverse platforms. Moreover, Slotie was also unable to provide relevant contact details, including its physical address.
Investors Warned About Metaverse Products
While there are legitimate investment opportunities in the metaverse, state securities regulators are warning Americans that the virtual space has also become an attractive target for fraudsters. Slotie isn’t the first to be issued a cease and desist order for allegedly running an illegal investment scheme linked to the metaverse. The Sand Vegas Casino Club and Flamingo Casino were also previously hit with enforcement actions for similar violations.
Joe Rotunda, director of the Texas State Securities Board, said new investment products tied to the metaverse, including NFTs, that promise passive income, often bear “significant undisclosed risks“, which is why investors should be extra careful when dealing with companies operating such schemes.