SEC Charges Stoner Cats Over $8M Unregistered NFT Offering: Mila Kunis-Backed NFT Project to Pay $1M Penalty

The Securities and Exchange Commission (SEC) charged Stoner Cats 2 LLC (SC2) with conducting an unregistered offering of crypto asset securities in the form of non-fungible tokens (NFTs) that raised about $8 million from investors to finance an animated web series.

SEC Slaps Stoner Cats 2 With Charges: NFTs Deemed Unregistered Securities in $8M Offering

According to the SEC order issued on Wednesday, SC2 offered and sold more than 10,000 NFTs for around $800 each on July 27, 2021, selling out in just 35 minutes. The marketing campaign highlighted benefits like the ability to resell the NFTs on the secondary market, the SEC said.

SC2 also emphasized the expertise of its Hollywood producers, knowledge of crypto, and involvement of famous actors, leading investors to expect profits from rising resale value if the web series succeeded. The project was crafted by the American actress and producer, Mila Kunis for the animated series produced by Orchard Farm Productions.

SC2 configured the NFTs to earn 2.5% royalties on secondary sales and encouraged trading, the SEC said. Investors subsequently spent over $20 million on at least 10,000 secondary market transactions. But SC2 violated securities laws by offering the crypto assets to the public without registering the offering, the SEC’s court order concluded.

“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,” said Gurbir Grewal, SEC enforcement division director. Grewal added:

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.

The unregistered NFT offering allegedly deprived investors of important disclosures for making informed decisions, said Carolyn Welshhans, an SEC associate enforcement director. “Stoner Cats wanted all the benefits of offering and selling a security to the public but ignored the legal responsibilities that come with doing so,” she said.

SC2 agreed to a cease-and-desist order, a $1 million penalty, destroying its NFTs, and publishing notice of the charges. The penalty will be used to compensate investors reportedly harmed by the unregistered offering. SC2, however, did not admit or deny the SEC findings.

The SC2 case follows the SEC cracking down on the NFT project launched by Los Angeles-based media company Impact Theory. The firm settled with the SEC and agreed to destroy the NFTs it held and remove royalties

What do you think about the charges SEC brought against Stoner Cats? Share your thoughts and opinions about this subject in the comments section below.

from Bitcoin News https://ift.tt/NJC621Q