The Los Angeles-based media and entertainment company, Impact Theory, has been fined by the United States Securities and Exchange Commission (SEC) for conducting an unregistered sale of securities in the form of non-fungible tokens (NFTs).
According to an official press release, the SEC alleged that Impact Theory launched an NFT collection called Founder’s Keys between October and December 2021. The collection consisted of various NFTs grouped into three tiers – Legendary, Heroic, and Relentless. Investors from multiple locations, including the U.S., participated in the collection, resulting in Impact Theory raising approximately $30 million from the sale.
The SEC stated that Impact Theory enticed users to buy into the sale by promising significant value to NFT holders and aiming to become the next Disney. However, by failing to register the NFT collection as investment contracts and securities, Impact Theory violated the SEC’s securities laws, which require projects and companies to register their products as securities before offering them to U.S. investors.
Antonia Apps, the Director of the SEC’s New York Regional Office, emphasized that the SEC considers all forms of digital tokens, including cryptocurrencies and NFTs, to fall under its regulatory purview.
As part of the settlement, Impact Theory agreed to a cease-and-desist order and a fine of $6.1 million, equivalent to approximately 20% of the funds it raised. The company also committed to destroying all Founder’s Keys NFTs under its control.
This enforcement action by the SEC is consistent with its history of taking action against crypto-based projects. Recently, the SEC sued cryptocurrency investment adviser Titan for allegedly using misleading performance metrics in advertisements to attract investors.
Another ongoing legal battle involves the SEC and Ripple, a crypto-based payment company, regarding the alleged sale of an unregistered security called XRP. While Ripple secured a partial win, the SEC has filed an appeal against the ruling.
Tags: Crypto News, NFTs, Regulation, United States
