The United States Securities and Exchange Commission (SEC) is intensifying its regulatory efforts within the non-fungible token (NFT) realm, this time setting its sights on Stoner Cats — NFTs released to fund an adult animated series featuring five house cats.
The SEC alleges that Stoner Cats 2 LLC, the entity behind Stoner Cats, engaged in the sale of unregistered securities during the launch of the NFTs back in 2021. During this event, more than 10,000 NFTs were sold at a price tag of approximately $800 each. The company managed to sell out their entire NFT supply within a mere 35 minutes, raking in over $8 million in the process.
As a result of this legal scrutiny, Stoner Cats 2 LLC has agreed to pay a $1 million penalty. This settlement also includes a cease-and-desist order, although no admission of wrongdoing has been made. Additionally, the company has committed to liquidating any remaining NFT assets under its control.
In a bid to rectify the situation, Stoner Cats 2 LLC will establish a “Fair Fund” to reimburse investors who purchased the NFTs.
The SEC’s swift and decisive actions in the NFT market highlight its dedication to safeguarding investors and imposing regulatory oversight on this rapidly expanding space. Carolyn Welshhans, Associate Director of the SEC’s Home Office, emphasized the importance of registering securities, including those tied to crypto assets, to provide investors with essential information for informed decision-making.
This move by the SEC follows a similar enforcement action taken in August, when the agency targeted Impact Theory, a Los Angeles-based media company. Impact Theory faced penalties totaling $6.1 million for offering unregistered NFT securities known as “Founder’s Keys,” which violated securities laws.
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