The U.S. Securities and Exchange Commission (SEC) has turned its attention to the non-fungible token (NFT) market with a major move that highlights the changing regulatory environment surrounding cryptocurrencies. legal action Against media and entertainment company influence theory.
Impact Theory conducted an unregistered crypto asset securities offering in the form of non-fungible tokens that raised approximately $30 million from hundreds of investors, including those across the United States, the SEC said.
Impact Theory faces SEC lawsuit over unregistered NFT offering
According to the SEC’s order, Impact Theory launched three layers of NFTs between October and December 2021, called “Founder Keys,” labeled “Legendary,” “Heroic,” and “Ruthless.”
The order shows that Impact Theory aggressively promoted “Founders’ Keys” as an investment opportunity, suggesting that investors would profit if the company achieved its goals.
The impact theory is said to position NFTs as a potentially lucrative business compared to building the “next Disney” and promising great value to buyers. However, the SEC determined that these NFTs constitute investment contracts and therefore fall within the definition of securities.
According to the SEC announcement, Impact Theory violated the federal securities laws by issuing and selling these “crypto-asset securities” without proper registration or exemption.
Antonia Apps, Director of the SEC’s New York Regional Office, emphasized the importance of NFT registrations, saying:
Without an effective exemption, any form of securities offering must be registered…without registration, investors of all types are deprived of the protections afforded by the strict disclosures and other safeguards our securities laws have long provided.
Impact Theory has agreed to the cease and desist order without admitting or denying the SEC’s findings. The company has been ordered to pay more than $6.1 million in disgorgement, prejudgment interest and civil penalties.
A fair fund will also be established to compensate investors for the fees paid to purchase NFTs. Impact Theory will destroy all Founders Keys, post the SEC’s order on its website and social media channels, and forfeit any royalties previously received from future secondary market transactions involving Founders Keys.
Overall, the SEC’s recent enforcement action against Impact Theory’s alleged “unregistered NFT products” marks a significant development in the regulatory environment for the crypto industry.
The lawsuit has implications beyond impact theory, as it raises key questions about the legal status of NFTs and the responsibilities of market participants.
To be sure, the outcome of this case could set a precedent for future regulation and shape the trajectory of the entire non-fungible token market.
Featured image from iStock, chart from TradingView.com