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NJ Bureau of Securities Issues Order Today to Halt Internet Sales of Fraudulent NFT Investments tied to the Metaverse

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the staff of the Ridgewood blog

Ridgewood NJ,  Attorney General Matthew J. Platkin announced that the NJ Bureau of Securities (“Bureau”) took action today to halt an online entity purportedly operating from the country of Georgia from offering unregistered securities in the form of non-fungible tokens (NFTs) tied to an online slots game and the metaverse.

In a Cease and Desist Order issued today, the Bureau directed online entity “Slotie” to immediately stop violating New Jersey’s securities laws and cease and desist from offering NFTs purported to raise capital relating to online gaming and a metaverse.

The Bureau issued the enforcement action in coordination with the Alabama Securities Commission, the Kentucky Department of Financial Institutions, and the Texas State Securities Board.

The offerings, called “Slotie NFTs” and “Slotie Junior NFTs” (collectively “Slotie NFTs”) purportedly provide investors the right to passively share revenues from an online slots game distributed to third-party casinos and the right to passively share in the profits.

The Bureau found that Slotie NFTs are securities and are not registered with the Bureau, as required by law.

The Bureau also found that Slotie is offering the unregistered securities while fraudulently concealing material information from investors, including Slotie’s assets and liabilities, its anticipated use of capital, and key risks tied to NFTs and metaverses.

The action against Slotie is the latest taken by the Bureau to safeguard investors from securities fraud tied to new technologies.

“As interest in digital assets grows, unfortunately so do opportunities for scammers,” said Attorney General 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.”

“Anyone selling securities in New Jersey must comply with New Jersey’s Securities Laws and those operating in the metaverse are no exception,” said Cari Fais. “We will not allow online entities to skirt the laws and regulations in place to protect investors from online schemes that promise big returns but in reality serve only to unlawfully enrich internet con-artists.”

The Bureau found that Slotie is engaging in fraud in connection with the offer of securities that includes:

  • Misrepresenting that 10,000 Slotie NFTs sold out in under 5 minutes, and 5,000 Slotie Junior NFTs sold out in under 2 minutes. There is no evidence on the blockchain to support these claims.
  • Failing to disclose its assets, liabilities, revenue, and other financial information germane to its operations.
  • Failing to disclose material facts relating to Slotie’s location and contact information, such as a physical office address, telephone number, and email address.

“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 Acting Bureau Chief Amy G. 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.”

The Bureau’s investigation was handled by Investigator Delfin Rodriguez.

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