The U.S. Securities and Exchange Commission (SEC) has filed charges against Stoner Cats, a non-fungible token (NFT) collection backed by actress Mila Kunis, which it has deemed as unregistered securities.
In a new press release, the regulatory agency says it is charging Stoner Cats, which raised $8 million thus far to finance an animated web series of the same name, for “conducting an unregistered offering of crypto asset securities.”
According to the SEC, the ad campaign for the NFT collection highlighted the option for owners to sell their NFTs to others over the secondary market as well as emphasized that it had backing from well-known actors and Hollywood producers, leading investors to expect profits.
As stated by Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, in the press release,
“Regardless of whether your offering involves beavers, chinchillas or animal-based NFTs, under the federal securities laws, it’s the economic reality of the offering – not the labels you put on it or the underlying objects – that guides the determination of what’s an investment contract and therefore a security.
Here, the SEC’s order finds that Stoner Cats marketed its knowledge of crypto projects, touted that the price of their NFTs could increase and took other steps that led investors to believe they would profit from selling the NFTs in the secondary market.
It’s therefore hardly surprising, as the order finds, that Stoner Cats sold its entire supply of NFTs in just 35 minutes, generating proceeds of over $8 million, most of which were then resold – not held as collectibles – in the secondary market within months.”
The company has agreed to pay a $1 million penalty for the charges.
Last month, the SEC announced similar charges against Los Angeles-based entertainment company Impact Theory, alleging the firm offered unregistered securities when it sold NFTs to its audience.
According to the regulatory body, selling NFTs with promises of future gains makes them qualify as investment contracts, which in turn makes them securities offerings.
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