Benzinga - The U.S. Securities and Exchange Commission (SEC) charged Los Angeles-based media and entertainment firm, Impact Theory, LLC, with conducting an unauthorized offering of crypto asset securities via non-fungible tokens (NFTs).
The company allegedly raised around $30 million from numerous investors, including those from the U.S., through this offering.
Between October and December 2021, Impact Theory introduced and sold three categories of NFTs, termed Founder’s Keys: "Legendary," "Heroic" and "Relentless."
The SEC's order highlighted that the company promoted these NFTs as an investment opportunity in their business, suggesting investors could gain profits if Impact Theory achieved its business goals.
The company even went as far as to claim they were "trying to build the next Disney" and assured "tremendous value" to the Founder’s Key holders if they succeeded, the SEC stated.
The SEC determined these NFTs were, in essence, investment contracts and thus classified as securities.
As a result, Impact Theory's act of offering and selling these securities to the public without registration or exemption was in violation of federal securities laws.
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Antonia Apps, director of the SEC’s New York Regional Office, emphasized, "Absent a valid exemption, offerings of securities, in whatever form, must be registered." She further added that without proper registration, investors were left without the protection and transparency guaranteed by U.S. securities regulations.
In response to the SEC's findings and without admitting any wrongdoing, Impact Theory consented to a cease-and-desist order.
The company is mandated to pay more than $6.1 million, which includes disgorgement, prejudgment interest and a civil penalty. Additionally, a Fair Fund will be established to reimburse the investors who purchased the NFTs.
As part of the agreement, Impact Theory would also destroy all Founder’s Keys in its control, announce the order on its online platforms and forgo any royalties from future secondary market sales of the Founder’s Keys.
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