State securities Regulators Filed to Stop Sales of NFTs
Texas State Securities Board
AUSTIN (News Release) State securities regulators filed coordinated enforcement actions to stop sales of NFTs by an organization in the country of Georgia. The actions accuse Slotie NFT (“Slotie”) of illegally and fraudulently selling nonfungible tokens, often referred to as NFTs, to raise capital for online and metaverse casinos. The actions were filed by the Alabama Securities Commission, Kentucky Department of Financial Institutions, and the Texas State Securities Board.
The actions accuse Slotie of issuing 10,000 Slotie NFTs that are similar to stock and other equities. The Slotie NFTs purportedly provide investors with ownership interests in the casinos and the right to passively share in the profits of the casinos. The rarity of each Slotie NFT, however, purportedly determines the amount of passive income payable to the owner. Slotie NFTs that contain rarer traits allegedly provide more passive income than NFTs consisting of more common traits.
Slotie also allegedly issued WATTs, an ERC-721 token on the Ethereum blockchain that plays a key role in the illegal scheme. According to the actions, Slotie promoted Slotie NFTs by telling investors that each Slotie NFT generates 10 WATTs per day. Investors owning 2 Slotie NFTs and 1,800 WATTs were purportedly able to mint a new NFT – a process that Slotie referred to as “breeding.” The new NFT, known as a Slotie Junior NFTs, purportedly doubles the profits paid to owners of Slotie NFTs and entitles investors to ownership of a plot of land in a metaverse.
The state securities regulators found that Slotie was illegally and fraudulently dealing in Slotie NFTs and Slotie Junior NFTs. For example, they accused Slotie of concealing its assets and liabilities, its anticipated use of capital, the identity of partnering casinos, and key risks tied to the metaverse casinos. They also alleged that Slotie was violating state registration laws, which are important statutes designed to protect investors.
State securities regulators have taken the lead in warning investors about emerging investment schemes tied to the metaverse. Although blockchain technology, digital assets, and metaverses are generating widespread public interest, bad actors are now leveraging their interests to perpetrate fraudulent schemes. State securities regulators recently filed enforcement actions to stop similar illegal offerings promoted by Flamingo Casino Club and Sand Vegas Casino Club. These recent enforcement actions also involved organizations illegally raising capital for online and metaverse casinos.
