(Finance) – The Securities and Exchange Commission (SEC) accused Impact Theorya Los Angeles-based media and entertainment company, to have conducted aunregistered offering of crypto asset securities in the form of alleged non-fungible tokens (NFTs). Through the offering, Impact Theory has raised approximately $30 million from hundreds of investors, including investors throughout the United States. This is the first SEC enforcement action involving NFTs.
Per the SEC order, from October to December 2021, Impact Theory offered and sold three tiers of NFTs, known as Founder’s Keys, which Impact Theory called “Legendary”, “Heroic” and “Relentless”. Among other things, Impact Theory pointed out that he was “trying to build the next Disney” and, if successful, would provide “a huge valueto buyers. It appears from the ordinance that the NFTs offered and sold to investors were investment contracts and therefore securities. As a result, Impact Theory violated federal securities laws by offering and selling these crypto asset securities to the public in an registered which was not otherwise exempt from registration.
“In the absence of a valid exemption, securities offerings, in any form, must be registered,” said Antonia Apps, director of the SEC’s New York regional office. “Without registration, investors of all types are deprived of the protections afforded to them by robust disclosures and other safeguards provided by our securities laws for a long time”.
Without admitting or denying the SEC’s findings, Impact Theory agreed to a cease-and-desist order and di pay over $6.1 million in disgorgement, interest and civil fine. The ordinance also establishes a fund to repay the money aggrieved investors paid to purchase the NFTs.