Crypto Updates

SEC Charges Stoner Cats, Fines $1 Million

Anndy Lian

Securities and Exchange Commission (SEC) has announced that Stoner Cats 2 LLC
(SC2) is facing charges for conducting an unregistered offering of crypto asset
securities in the form of non-fungible tokens (NFTs). The tokens were sold to
raise funds for an animated web series titled Stoner Cats. The
SEC’s order revealed that this NFT offering raised approximately $8 million
from investors.

July 27, 2021, SC2 offered and sold over 10,000 NFTs, each priced at around
$800, which sold out in a mere 35 minutes. SC2’s marketing campaign emphasized
the benefits of owning these NFTs, including the option for owners to resell
them on the secondary market.

campaign also highlighted the team’s expertise as Hollywood producers, their
knowledge of crypto projects, and the involvement of well-known actors in the
web series. These factors led investors to believe that they could profit from
the NFTs in the secondary market if the web series succeeded.

configured the Stoner Cats NFTs to provide the company with royalties of 2.5 percent for each secondary market transaction involving these tokens. This
royalty structure encouraged individuals to buy and sell the NFTs, resulting in over $20 million
being spent in more than 10,000 transactions.

SC2’s Agreement to
Cease-and-Desist Order and Civil Penalty

SEC’s order determined that SC2’s actions violated the Securities Act of 1933,
as they offered and sold crypto asset securities to the public in an
unregistered offering that did not qualify for an exemption from registration.

S. Grewal, the Director of the SEC‘s Division of Enforcement,
emphasized that the economic reality of the offering, rather than the labels or
underlying objects, determines whether an investment qualifies as a security.

He stated, “Stoner Cats marketed its knowledge of crypto
projects, touted that the price of their NFTs could increase and took other
steps that led investors to believe they would profit from selling the NFTs in
the secondary market.”

Welshhans, the Associate Director of the SEC’s Home Office, pointed out that SC2
wanted the benefits of offering and selling a security to the public but failed
to meet the legal responsibilities associated with doing so. Registration of
securities provides investors with the necessary disclosures to make informed
investment decisions.

admitting or denying the SEC’s findings, SC2 has agreed to a cease-and-desist
order and a civil penalty of $1 million. The…

Click Here to Read the Full Original Article at CryptoCurrency – Finance Magnates | Financial and business news…