A collapsed company that built a digital enterprise called Game of Silks that aimed to bring virtual ownership of racehorses and farms to the metaverse is being sued for securities law violations.
According to a class action lawsuit filed Feb. 24 in a South Florida federal court, the company pitched the operation as a counterpart of real racehorses virtually owned via cryptocurrency-funded non-fungible tokens. At its inception owners of the virtual horses would win roughly 1% of actual racehorses' real earnings. Defendants allegedly also promised investors could combine land NFTs to build virtual stables and rent stalls to other players’ horse NFTs.
Named defendants are Game of Silks, Dan Nissanoff, Troy Levy, Tropical Racing, Ron Luniewski, and Derek Cribbs. Nissanoff is named as the CEO and founder of Game of Silks and Levy as vice president and founder. Luniewski and Cribbs were identified as corporate officers. Tropical Racing is a business in Versailles, Ky., according to the complaint.
Allegations in a lawsuit state one side of any given case. The defendants will have an opportunity to respond to the allegations.
The complaint alleges the sale of crypto assets amounted to securities under the requirements of the federal Securities Act of 1933; that defendants raised the equivalent of more than $4 million in season with one of the horse NFTs; that the assets were not registered with the United States Securities and Exchange Commission in violation of federal law; and that the sale of the assets as well as "material omissions and half-truths" in their sale and promotion were in violation of securities law or, in the alternative, unjust enrichment.
Among other allegations, after the company folded Game of Silks, the lawsuit alleges that at a conference call after the collapse it was revealed for the first time that the company needed $20 million invested annually to stay afloat.
"(A)t first the defendants paid out the winnings as they said that they would, distributing more than half a million dollars to owners of thousands of horses," the suit reads.
"Unfortunately, everything fell apart shortly after the Season 2 Horse NFTs failed to sell as expected," according to the complaint. "The value of the other NFTs collapsed, the payouts from the Season 1 Horse NFTs stopped, and the project stopped development almost immediately. Plaintiff and other members of the class are left with nothing for the millions of dollars that they invested."
The company has an account on X that has not been updated since late June 2024.
The NFT lawsuit seeks undetermined damages including the amounts invested in the company by members of the class and attorney fees.
