SEC Charges Los Angeles Company with Offering NFT Securities
SEC has charged the US-based media company Impact Theory with offering and promoting the investment potential of their Founder’s Key NFTs. Impact Theory has neither denied nor admitted to the charges, but has agreed to pay a $6.1 million fine.
The US Securities and Exchange Commission (SEC) has filed charges against Impact Theory, LLC, a media and entertainment company based in Los Angeles, for allegedly offering unregistered securities in the form of NFTs.
SEC Accuses Impact Theory of Violating Securities Laws
In a press release on Monday, the SEC highlighted that Impact Theory had raised more than $30 million through this process, including from investors in the United States.
“Impact Theory emphasized its aspiration to build the next Disney and promised tremendous value to purchasers of Founder’s Keys,” said the SEC.
By promoting the NFTs as investment contracts, Impact Theory essentially offered securities, thereby violating federal securities laws. As part of the settlement, the Los Angeles-based company has agreed to pay a fine of over $6.1 million, abide by a cease-and-desist order, refund affected investors, and destroy all the NFTs.
According to the SEC, “Impact Theory agreed to destroy all Founder’s Keys in its possession or control, publish notice of the order on its websites and social media channels, and eliminate any royalty that Impact Theory might otherwise receive from future secondary market transactions involving the Founder’s Keys.”
This is the first enforcement action by the SEC in the NFT space, following a series of lawsuits and settlements against prominent cryptocurrency exchanges such as Binance and Coinbase.
However, the regulator faced a major setback in July when US Judge Analisa Torres ruled that the cryptocurrency XRP is not a security. The SEC has recently filed a motion seeking an interlocutory appeal, but many legal experts and industry leaders believe that this move will only lead to further embarrassment for the agency.