State regulators in Alabama, Kentucky, New Jersey and Texas have filed simultaneous enforcement actions to halt the sales of NFTs from an online entity operating from the country of Georgia.
The quartet allege that a group named Slotie has been offering unregistered securities in the form of non-fungible tokens tied to an online slots game and the metaverse.
The emergency cease and desist orders were filed by the Alabama Securities Commission, the Kentucky Department of Financial Institutions, New Jersey Bureau of Securities and the Texas State Securities Board.
“As interest in digital assets grows, unfortunately so do opportunities for scammers,” said New Jersey Attorney General Matthew Platkin.
“We are vigilantly monitoring the online offerings of new financial products to identify and put a stop to fraudulent schemes targeting investors eager to jump into a hot new market.”
The orders call for Slotie to immediately stop violating laws and end the offer of NFTs, which were found to be unregistered securities, that were allegedly issued to raise capital relating to online gaming and the metaverse.
Detailed the alleged illegal gambling operation, the regulators accuse Slotie of issuing 10,000 NFTs that are said to be similar to that of stock and other equities
These reportedly provide investors with ownership interests in the casinos and the right to passively share in the profits. The rarity of each was said to determine the amount of passive income payable to the owner. Slotie NFTs that contain rarer traits allegedly provide more passive income than those perceived to be more common.
Furthermore, it is also claimed that Slotie is offering the unregistered securities while fraudulently concealing material information from investors, including assets and liabilities, anticipated use of capital and key risks tied to NFTs and metaverses.
The order notes that Slotie failed to disclose key business information, such as location and contact details that include physical office address, telephone number, and email address.
It is also said that the group failed to disclose its assets, liabilities, revenue and other financial information related to its operations.
“The Bureau is working diligently to safeguard New Jerseyans from fraud and deceit in online investment offerings and we urge investors to help protect themselves by looking past the hype and high return promises and approach new investment products with caution,” said New Jersey Acting Bureau Chief Amy Kopleton.
“It is important to know the risks associated with unregistered securities such as the Slotie NFTs. Moreover, major warning bells should go off any time an investment product is being offered by an online entity that fails to disclose even the most basic information required by law—such as who they are or what they intend to do with investors’ money.”