SEC settles first NFT enforcement case, fines LA media company $6M


Share post:

The U.S. Securities and Exchange Commission is suing a non-fungible token project, marking the first time the authority has taken enforcement action against a company for selling unregistered NFTs.

Impact Theory, a Los Angeles-based media company, “encouraged potential investors to view the purchase of Founder’s Key [the company’s NFT project] as an investment into the business, stating that investors would profit from their purchases if Impact Theory was successful in its efforts,” the SEC order said, adding that the digital assets offered to investors were in the form of “investment contracts” and therefore “securities.”

All in all, Impact Theory raised around $30 million from hundreds of investors, including those in the U.S.

The case is significant to the crypto industry, which has been hit with a flurry of regulatory clampdowns in the U.S., as it offers a clue for how NFTs could be regulated in the future. Many other NFT projects have used language that’s similar to how Impact Theory marketed its digital assets, that is, touting their blockchain-based identifiers representing digital asset ownership as investment opportunities.

Impact Theory neither admitted nor denied the SEC’s findings but agreed to pay more than $6.1 million in penalties to settle the allegations. The order also established a “Fair Fund” to compensate impacted investors as well as required Impact Theory to destroy all of its Founder’s Key NFTs and eliminate any royalties that it might collect from secondary market transactions.

The company is not giving up on its NFT endeavor. In an X post, the founder of Impact Theory stressed that his company will ensure its future digital assets will be of utility rather than financial purposes:

“We will operate our go-forward business consistent with our good faith best understanding of all applicable laws, rules, and regulations, will make clear that all of Impact Theory’s digital assets are collectibles with utility within the exciting new landscape of Borderless Entertainment, and will fiercely discourage people from treating our digital assets as anything other than what they are—collectibles with utility. We will have more news on this in the coming weeks and months.”

Source link

Lisa Holden
Lisa Holden
Lisa Holden is a news writer for LinkDaddy News. She writes health, sport, tech, and more. Some of her favorite topics include the latest trends in fitness and wellness, the best ways to use technology to improve your life, and the latest developments in medical research.

Recent posts

Related articles

GIC in talks to lead $40 million funding in India’s Vegrow

GIC is in talks to invest in the Indian startup Vegrow, which runs a business-to-business marketplace for...

Spotify launches Jam, a real-time collaborative playlist controlled by up to 32 people

Spotify is today introducing its latest social feature, Jam, which allows multiple people to blend their own...

Google is killing Gmail’s basic HTML view in 2024

Another day, another Google product goes to the graveyard. The company is sunsetting Gmail’s basic HTML view,...

Telegram starts to look like a super app, echoing WeChat

Telegram, the popular messenger with 800 million monthly active users worldwide, is inching closer to adopting an...

Amazon’s outgoing Echo head is Blue Origin’s new CEO

Blue Origin CEO Bob Smith is retiring at the end of the year and his replacement is...

Ford halts work on $3.5B EV battery factory with China’s CATL

Ford confirmed Monday it has immediately stopped work at a $3.5 billion factory in Michigan that was...

Signal’s Meredith Whittaker: AI is fundamentally ‘a surveillance technology’

Why is it that so many companies that rely on monetizing the data of their users seem...

New SEC cybersecurity disclosure rules: What you need to know to stay in compliance

Cinthia Motley Contributor Cinthia Motley is the Director of Dykema’s Global Data Privacy and Information Security Practice Group and...