Top Class Actions’s website and social media posts use affiliate links. If you make a purchase using such links, we may receive a commission, but it will not result in any additional charges to you. Please review our Affiliate Link Disclosure for more information.
SEC NFTs enforcement overview:
- Who: Impact Theory has reached a $6 million settlement with the U.S. Securities and Exchange Commission.
- Why: Impact Theory allegedly offered and sold non-fungible tokens in a manner designed to evade securities laws.
- Where: The Impact Theory NFT settlement is before the SEC.
The U.S. Securities and Exchange Commission (SEC) has reached a $6 million settlement with entertainment firm Impact Theory LLC over allegations its non-fungible token (NFT) sales were structured to defy securities laws.
This SEC NFTs settlement is the first SEC enforcement action to involve non-fungible tokens.
Impact Theory allegedly sold crypto asset securities called Founder’s Keys NFTs to hundreds of investors from October to December 2021 and raised approximately $29.9 million, according to the SEC enforcement order.
The KeyNFTs involved a chiplike graphic with different symbols on each token.
SEC enforcement order says Impact Theory represented KeyNFTs as investment opportunity
Prior to offering the NFTs, Impact Theory reportedly hosted several live events on Discord, posted recordings on its Discord channel, and shared information on its website and social media sites.
Impact Theory allegedly represented the purchase of KeyNFTs as a way to invest in the business and told investors that they would profit if Impact Theory was successful. For example, Impact Theory allegedly told investors that it was “trying to build the next Disney,”and if its efforts were successful, KeyNFT buyers would experience “tremendous value” from their purchases.
KeyNFT investors allegedly had a reasonable expectation of a future profit based on Impact Theory’s representations and efforts.
“KeyNFTs were offered and sold as investment contracts, and therefore securities,” according to precedent from relevant case law, the SEC claims.
The offer and sale of KeyNFTs was not registered with the SEC, nor did it qualify for an exemption from registration with the Commission, the SEC says.
“Impact Theory violated Sections 5(a) and 5(c) of the Securities Act by offering and selling these securities without having a registration statement filed or in effect with the Commission or qualifying an exemption from registration,” the SEC enforcement order says.
Under the terms of the SEC NFTs settlement, Impact Theory must destroy all KeyNFTs in its control within 10 days of the date of the order and publish notice of the SEC enforcement order on its websites and social media channels.
Additionally, Impact Theory must revise its computer protocols to eliminate royalties that Impact Theory may receive from future secondary market transactions in KeyNFTs.
Two of five SEC commissioners dissented with the order, finding that the NFTs did not constitute shares of the company or generate dividends for purchasers.
Earlier this year, DraftKings was hit with a class action lawsuit alleging it failed to register NFTs as securities in violation of federal and state law.
Do you agree with SEC enforcement against NFTs as unregistered securities? Tell us what you think in the comments.
The SEC enforcement investigation was conducted by Benjamin Mishkin, Jessica Quinn and Judith Weinstock.
The SEC NFTs settlement is In the Matter of: Impact Theory LLC, Administrative Proceeding No. 3-21585, before the U.S. Securities and Exchange Commission.
Don’t Miss Out!
Check out our list of Class Action Lawsuits and Class Action Settlements you may qualify to join!
Read About More Class Action Lawsuits & Class Action Settlements:
3 thoughts onEntertainment co. agrees to pay $6M in first SEC enforcement over NFTs
Add me please
Please add me
Thank yoh