State regulators warn real money can be lost in fake world
Denizens of the metaverse can be ripped off by virtual investments, the North American Securities Administrators Association said in an advisory.
The metaverse may be fake but financial rip-offs in the virtual world can cause actual harm, state securities regulators warned investors Wednesday.
The metaverse is an online immersive environment created by augmented reality technology that allows people to live and interact as they would in real life through personal representations known as avatars.
But the North American Securities Administrators Association, the umbrella group for state regulators, cautioned that real fraudsters lurk in virtual reality where there is no financial regulation.
“Real-world metaverse scams are already here and can include illegal stock promotions, pump-and-dump campaigns, or Ponzi schemes with scammers offering investments in metaverse-focused companies or technologies,” NASAA said in an Informed Investor Advisory. “Scams inside metaverse virtual worlds can be similar to real-world scams, but they are likely to include a virtual component such as crypto assets or virtual real estate.”
Metaverse denizens can invest in virtual real estate, non-fungible tokens and businesses operating in the virtual realm. But one reality of investing still applies – all investments come with risks, and there’s no such thing as a sure thing, state regulators said.
“Our experience with so-called investment opportunities found in the metaverse, is that we see the same old financial scams simply dressed in new clothes and offered to investors in the metaverse,” Melanie Senter Lubin, Maryland securities commissioner and NASAA president, said in a statement. “Investors need to be wary of any investment that is promising unrealistic returns with minimal risk.”
The NASAA advisory highlights recent enforcement actions by five state regulators against an organization with possible ties to Russia that promoted fraudulent metaverse investments in a virtual casino.
“Investors would purportedly profit when patrons, acting as avatars, paid to play virtual craps, blackjack and other games,” the advisory states. “Regulators further alleged the club lied about having a partnership with the physical Flamingo Casino in Las Vegas and failed to back claims that it was buying digital land from rapper and TV personality Snoop Dogg.”
Some legitimate investment advisers are setting up shop in the metaverse. But NASAA cautioned investors that in the virtual world, just as in reality, they only should do business with firms registered with federal or state regulators.
Don’t talk investments with an avatar, NASAA said, because it may be masking a fraudster. “In the metaverse, avatars add another layer of complexity, because you may feel some commonality with the way a person has chosen to portray or represent themself. If someone brings up investing, asks you for money, or discusses finances, it’s best to move on to a different topic.”
[More: There’s a portrait of Jamie Dimon hanging in JPMorgan’s metaverse lounge]
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