Texas regulators seizes Sand Vegas Casino Club for ‘fraudulent investment scheme tied to metaverses’

Texas and Alabama state securities regulators issued an immediate cease and desist order to Sand Vegas Casino Club, a virtual, Cyprus-registered casino. 

“Stop a fraudulent investment scheme tied to metaverses,” the corporation has been ordered.

Sand Vegas Casino Club, Martin Schwarzberger, and Finn Ruben Warnke were accused of illegally providing NFTs to support the creation of virtual casinos in metaverses by the Texas State Securities Board on April 13.

Sand Vegas allegedly issued 11,111 NFTs in order to raise money

With popularity of metaverse continuously increasing with big players like Mastercard filing metaverse and NFT trademark applications, Sand Vegas allegedly issued 11,111 NFTs in order to raise money for its metaverse casinos. The company promised people who bought Gambler NFTs and Golden Gambler NFTs a part of the casino’s future profits. Owners of Gambler NFTs may earn between $1,224 and $24,480 per NFT yearly, according to Sand Vegas’ forecasts, whereas Golden Gambler NFTs holders might earn between $6,480 and $81,000 per NFT during the same time period.

The listing price for Gambler NFTs ranged from 0.23 ETH ($744.38) to 777.77 ETH ($2.5 million) on April 9, while the price for Golden Gambler NFTs was between 2.13 ETH ($6,793) and 169 ETH ($547,000).

The order reveals that the respondents argued their NFT offerings were not securities and hence did not fall under securities laws. 

The order reveals that the respondents argued their NFT offerings were not securities and hence did not fall under securities laws. “The Respondents are also devising a scheme to obstruct any attempt to regulate the Gambler NFTs and Golden Gambler NFTs,” the document stated.

Sand Vegas is unable to proceed with its NFT sales since it is not registered to sell securities in Texas or Alabama. The effort of authorities appears to have the potential to start a broader trend. 

According to Joe Rotunda, enforcement director of the Texas State Securities Board, his agency is working together with other states to investigate similar offerings and develop regulatory action in the “hot area” of NFTs.