The SEC punished an entertainment company for trying to become the next Disney by illegally selling NFTs.
The United States Securities and Exchange Commission (SEC) charged Impact Theory, a media and entertainment company, with offering crypto asset securities in the form of NFTs without registration. The company gained approximately $30m from investors.
According to the SEC, Impact Theory issued Founder’s Keys, three-tier NTFs, between October and December 2021.
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The SCE’s order alleged that the firm presented NFTs as an investment into the business, claiming that if Impact Theory is successful, the investors will profit as well. To convince investors of possible value, Impact Theory reportedly used enticing statements, likening the company to Disney and saying there’s a chance to “capture tremendous value from the things that we’re building.”
According to the SEC, the NFTs sold to investors need to be classified as investment contracts and counted as securities. This means that Impact Theory broke the law by selling these securities to investors in an unregistered offering.
Director of the SEC’s New York Regional Office Antonia Apps explained:
Without registration, investors of all types are deprived of the protections afforded them by the robust disclosures and other safeguards long provided by our securities laws.
Impact Theory didn’t admit or deny the agency’s findings but agreed to pay $6.1m “in disgorgement, prejudgment interest, and a civil penalty.”
The company should also return money to investors who purchased NFTs, destroy all Founder’s Keys and won’t receive any potential royalties from future secondary market transactions related to these NFTs.
Co-founder of Impact Theory said he’s “happy to have concluded the SEC’s investigation so that we can focus on the future of our business and on our Community.”
The SEC has been making rounds in the crypto industry and is engaged in several pending litigations. Among them is the ongoing legal battle with Ripple Labs.
