SEC Sues Stoner Cats in Second Major NFT Enforcement Case. the project is settled for $1 million

The Securities and Exchange Commission (SEC) has charged Stoner Cats 2 LLC (SC2), creator of the Stoner Cats web series, with conducting an unregistered offering of non-tradable tokens (NFTs), marking the SEC’s second major enforcement action. in the NFT space.

The regulator found that SC2 had raised about $8 million from investors through the sale of more than 10,000 NFTs, which were sold for about $800, to fund the animated series. As the the SEC reportedSC2 agreed to a cease and desist order and to pay a $1 million civil penalty without admitting or denying the SEC’s findings.

According to Carolyn Welshhans, Deputy Director of the SEC’s Department of Internal Affairs:

“Registration of securities, including crypto asset securities, protects investors by providing them with disclosures so they can make informed investment decisions… Stoner Cats wanted all the benefits of offering and selling a security to the public, but ignored the legal responsibilities arising from such a thing.”

Consequently, the SEC found that SC2 had violated the Securities Act of 1933 by offering and selling these cryptoasset securities to the public in an unregistered or exempted offering.

“Economic Reality”

The SEC order revealed that SC2’s marketing strategy, both before and after the public sale of Stoner Cats NFTs, emphasized the specific benefits of owning the NFTs — in particular, the prospect of owners reselling their NFTs in the secondary market. This strategy was potentially driven by aspirations of a successful online series, which could lead to an increase in the resale value of NFTs. According to the SEC statement, investors were led to believe that they would benefit from the sale of NFTs in the secondary market due to SC2’s emphasis on its Hollywood production expertise, understanding of crypto projects and famous actors involved in the series. tissue. .

Specifically, the order found that SC2 structured Stoner Cats’ NFTs to provide itself with 2.5 percent royalties from every secondary market transaction involving the NFTs. This configuration, combined with SC2’s encouragement for individuals to buy and sell NFTs, resulted in buyers spending more than $20 million in more than 10,000 transactions.

This SEC enforcement action follows another case where the regulator charged Los Angeles-based media company Impact Theory with conducting an unregistered NFT offering. These actions suggest that the regulator is actively looking into NFT markets.

Despite industry-wide calls for “regulatory clarity,” SEC Chairman Gary Gensler has steadfastly maintained that the vast majority of digital assets qualify as securities under US law. In a June speech, Gensler rejected the view that current securities law does not adequately apply to digital assets, arguing that rebranding the contracts does not change the nature of their “economic reality”—the language that was echoed in today’s press release.

Gensler also rejected the “fair notice” claims, stating that some market participants may have made a calculated economic decision to risk enforcement as a cost of doing business.

DailyBlockchain.News Admin

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