The U.S. Securities and Exchange Commission (SEC) is charging a widely followed media company with securities violations in relation to the sale of non-fungible tokens (NFTs).
The SEC is announcing formal charges against the Los Angeles-based entertainer Impact Theory for allegedly offering NFTs as an “unregistered offering of crypto asset securities.”
“[The SEC] today charged Impact Theory, LLC, a media and entertainment company headquartered in Los Angeles, with conducting an unregistered offering of crypto asset securities in the form of purported non-fungible tokens (NFTs). Impact Theory raised approximately $30 million from hundreds of investors, including investors across the United States, through the offering.”
According to the SEC’s press release, Impact Theory encouraged followers to purchase NFTs from a collection known as “Founder’s Keys” with promises of investing in something that had the potential to become as large as “the next Disney,” promising “tremendous value” to the investors. According to the SEC, these sales and others were investment contracts and therefore constituted securities sales.
Says Antonia Apps, Director of the SEC’s New York Regional Office,
“Absent a valid exemption, offerings of securities, in whatever form, must be registered. Without registration, investors of all types are deprived of the protections afforded them by the robust disclosures and other safeguards long provided by our securities laws.”
Impact Theory has agreed to cease-and-desist NFT sales, to destroy all Founder’s Keys, and to pay out more than $6.1 million in fees and penalties. The entertainment company neither admits nor denies the SEC’s charges.
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