Collapsed Game of Silks Sued Over Securities Law Violations

MIAMI, Fla. — A class action lawsuit has been filed against Game of Silks, a now-defunct company that aimed to provide virtual ownership of racehorses through non-fungible tokens (NFTs), for alleged violations of securities laws. The lawsuit, filed on February 24 in federal court in South Florida, claims the company misled investors about its operations and financial status.

The plaintiffs allege that Game of Silks marketed its platform as a way for investors to own virtual racehorses and farms via cryptocurrency-backed NFTs. Initially, owners of these virtual horses were promised approximately 1% of the real earnings from actual racehorses. Moreover, the company claimed that users could combine NFTs to create virtual stables and rent stalls to others, enhancing their investment potential.

Named as defendants in the lawsuit are Game of Silks, its CEO and founder Dan Nissanoff, vice president Troy Levy, as well as corporate officers Ron Luniewski and Derek Cribbs. The complaint also mentions Tropical Racing, a business based in Versailles, Ky.

The lawsuit alleges that the sales of these crypto assets constituted securities under the federal Securities Act of 1933. It claims the defendants raised more than $4 million in connection with the sale of one of their horse NFTs, without registering the assets with the U.S. Securities and Exchange Commission, violating federal law.

Further allegations suggest that the marketing and promotion of the NFTs included “material omissions and half-truths,” which also could qualify as securities law violations or, alternatively, claims of unjust enrichment. The lawsuit highlights that following the company’s abrupt collapse, details emerged revealing that Game of Silks required $20 million in annual investment to remain operational.

“At 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 lawsuit states. “Unfortunately, everything fell apart shortly after the Season 2 Horse NFTs failed to sell as expected. The value of the other NFTs collapsed, the payouts from the Season 1 Horse NFTs stopped, and the project stopped development almost immediately.”

The plaintiffs claim to have lost their entire investments, which totaled millions of dollars. The lawsuit seeks unspecified damages, including the return of invested amounts and attorney fees.

Currently, Game of Silks maintains an account on social media platform X (formerly Twitter), which has not been updated since late June 2024.