The Securities and Exchange Commission (SEC), a U.S. government agency, has once again demonstrated its potential influence. On August 28, 2023, the regulators filed charges against Impact Theory, a media and entertainment corporation, for making unregistered NFT offerings. A press release from the Securities and Exchange Commission (SEC) stated that the company had been “conducting an unregistered offering of crypto asset securities in the form of purported non-fungible tokens (NFTs).”Also, hundreds of investors have contributed almost $30 million to Impact Theory through various offers. The investors, meanwhile, are represented nationally. Summary of the SEC’s Order Regarding the NFT Project.
According to the SEC’s order, between October and December 2021, Impact Theory issued and sold three tiers of non-fungible tokens (NFTs) called Founder’s Keys. As for the company’s description, it used words like “legendary,” “heroic,” and “relentless.” Investment in the form of a Founder’s Key has been recommended by Impact Theory to interested parties. Company promised investors a return on their investments if the business was successful, the government agency claims. The firm has even gone so far as to say it is “trying to build the next Disney.” If this worked, it would provide “tremendous value” to those who purchased Founder’s Keys. SEC’s ruling also concludes that the NFTs in question were “investment contracts” and, hence, “securities” when offered and sold to the general public.
The order states that because “Impact Theory violated the federal securities laws by offering and selling these crypto asset securities to the public in an unregistered offering that was not otherwise exempt from registration,” the company must stop doing so. Statements from Authority Figures Director of the SEC’s New York Regional Office Antonia Apps made the following statement. She stated, “Absent a valid exemption, offerings of securities, whatever the form, must be registered.” Moreover, the applications stated that “without registration, investors of all types are deprived of the protections afforded to them by the robust disclosures and other safeguards long provided for them by our securities laws.” Former Securities and Exchange Commission official and current Coinbase policy chief Hermine Wong elaborated:
“This gives you a sense of the SEC’s strategy when it comes to crypto, pulling anything that’s crypto-related into their jurisdiction.” According to the SEC’s press release, “without admitting or denying its findings, Impact Theory agreed to a cease-and-desist order finding that it violated registration provisions of the Securities Act of 1933 and ordering it to pay a combined total of more than $6.1 Million in disgorgement, prejudgment interest, and a civil penalty.” The impacted investors’ payments for the NFTs are being returned through a Fair Fund established under the Court. Impact Theory “agreed to destroy all Founder’s Keys in its possession or control,” SEC said. “Impact Theory also agreed to post notice of the order on its websites and social media channels,” the commission added.
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