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An NFT Project Added its Name Under SEC’s ‘Charge Sheet’

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An NFT Project Added its Name Under SEC’s ‘Charge Sheet’
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The U.S. government agency, the Securities and Exchange Commission (SEC), once again showed its potential power. The agency charged Impact Theory, a media and entertainment company, on August 28, 2023, over unregistered NFT offerings.

As mentioned in the SEC’s press release, the company was “conducting an unregistered offering of crypto asset securities in the form of purported non-fungible tokens (NFTs).”

It must also be noted that Impact Theory has raised nearly $30 Million from hundreds of investors through offerings. Meanwhile, the investors are included across the United States.

Highlights of SEC Order for NFT Project

As noted in the SEC’s order, Impact Theory has offered and sold 3 tiers of NFTs known as Founder’s Keys from October to December 2021. On the other hand, the company called it “Legendary,” “Heroic,” and “Relentless.”

Impact Theory has also urged potential investors to watch the purchase of a Founder’s Key as an investment into the business. According to the government agency, the company stated to investors that it would profit from their purchases if it was successful in their efforts

Moreover, the company has emphasized that it was “trying to build the next Disney.” In case they were successful, it would deliver “tremendous value” to the Founder’s Key buyers. The order by the SEC further finds that the NFTs offered and sold to investors were “investment contracts” and therefore “securities”.

Therefore “Impact Theory violated the federal securities laws by offering and selling these crypto asset securities to the public in an unregistered offering that was not otherwise exempt from registration,” as noted in the order.

The Officials Statements

Over the following, Antonia Apps, Director of the SEC’s New York Regional Office, shared her statement. She said, “Absent a valid exemption, offerings of securities, in whatever form, must be registered.”

Apps further added that “without registration, investors of all types are deprived of the protections afforded them by the robust disclosures and other safeguards long provided by our securities laws.”

Hermine Wong, the former head of policy at Coinbase and a former SEC regulator, further said “This gives you a sense of the SEC’s strategy when it comes to crypto, pulling anything that’s crypto-related into their jurisdiction.”

The SEC has mentioned that “without admitting or denying its findings, Impact Theory agreed to a cease-and-desist order finding that it violated registration provisions of the Securities Act of 1933 and ordering it to pay a combined total of more than $6.1 Million in disgorgement, prejudgment interest, and a civil penalty.”

The order also gives a Fair Fund to return monies that affected investors who paid to buy the NFTs. “Impact Theory agreed to destroy all Founder’s Keys in its possession or control, publish notice of the order on its websites and social media channels, and eliminate any royalty that Impact Theory might otherwise receive from future secondary market transactions involving the Founder’s Keys,” SEC lastly added.

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