The NFT frenzy that dominated 2021 has led to major brands venturing into this area. The same thing happened with the metaverse phenomenon. However, NFT investors are now silent, causing prices to plummet. The SEC continues its fight against irregularities in the crypto space and has announced its latest sanction today.
SEC Crypto Case
The Securities and Exchange Commission (SEC) today accused Impact Theory, a media and entertainment company based in Los Angeles, of issuing an unregistered crypto security in the form of NFT. This initiates a painful process for NFT investors. Unlike cryptocurrencies, some investors believed that NFTs would not be subject to unregistered securities lawsuits. However, the SEC has responded to this belief.
“Impact Theory highlighted that it is ‘trying to build the next Disney’ among its other promises and that it would provide ‘enormous value’ to those who purchase the Founder’s Key if successful. The decision establishes that the NFTs offered and sold to investors are investment contracts and therefore securities. Accordingly, Impact Theory has issued unregistered securities.”
The collection represented shares of the company. Those who owned the Founder’s Key were expecting a share of the profits.
Antonia Apps, Director of the SEC’s New York Regional Office, said:
“Unless there is a valid exemption, securities offerings must be registered, regardless of the manner in which they are conducted. By failing to register, investors of all types are deprived of the protections afforded to them by our long-standing securities laws and other safeguards.”
Following this incident, the base prices of NFTs that promise profit sharing may experience significant declines. Impact Theory, without accepting or denying the SEC’s findings, has agreed to a cease and desist order that requires payment of over $6.1 million in restitution, disgorgement, prejudgment interest, and civil penalties for violating the registration provisions of the Securities Act of 1933. The decision also creates a Fair Fund to refund the money paid by victim investors to purchase NFTs. Impact Theory will destroy all collection pieces in its possession or control.
