The company behind the series will also establish a fund to return money to investors affected by the situation and destroy all NFTs in its possession or control.

“According to the SEC, the Stoner Cats 2 LLC didn’t admit or deny its findings but agreed to a cease-and-desist order and to pay the $1 million. The LLC will also establish a fund to return money to investors affected by the situation, and will destroy all NFTs related to the series that are in its possession or control. Stoner Cats 2 LLC must also post a public notice about the SEC’s order.”

  • RegalRedRaven@lemmy.worldOPM
    6·
    1 year ago

    A bit on the legal side- Before securities, like stocks, bonds, and notes, can be offered for sale to the public, they first must be registered with the Securities and Exchange Commission (SEC). Any stock that does not have an effective registration statement on file with the SEC is considered “unregistered.”

    In both enforcement actions, the SEC determined that the NFTs were securities under the Howey Test. The Howey Test determines what qualifies as an “investment contract,” subjecting the asset to U.S. securities laws. An investment contract exists if there is an "investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others. Basically, This isn’t the first time the SEC has charged someone for selling NFTs without registering them.

    In this case- The NFTs themselves, as I understand it, were pictures of cats that if purchased granted access to view the animated show. They were advertised as something that would increase in value that could be resold.

    So the company is being fined for selling them to the public without registering them. Several celebs and industry pros were involved in making the show, but it’s unclear how involved any of them were in the NFT of it all. (Probably not much.)