An NFT creator just made history this week, but probably not in the way he envisioned.
On Monday, the US Securities and Exchange Commission (SEC) announced that a media outlet known as Impact Theory has been accused of conducting an unregistered security offering for a crypto asset.
This isn’t entirely new territory, especially since the SEC has started to dig into it more serious on cryptocurrency enforcement over the past year. However, as TechCrunch mention, thatThis is the first-ever time the SEC has targeted crypto-asset securities in the form of non-fungible tokens (NFTs).
According to the SEC, Impact Theory raised more than $30 million from the NFT offering, which took place between October and December 2021. Through the company’s NFTs, called Founder’s Keys, Impact Theory offered three tiers of investment: Legendary, Heroic, and Heroic. and “Inexorable”. Impact theory presented the NFT purchase as an investment in the company and emphasized that if the company was successful, acquiring an NFT could result in profits.
“Imagine if you could have joined Disney when they made Steamboat Willie,” the company claimed.
The SEC says Impact Theory has granted a cease and desist order on the grounds that it violates the Securities Act of 1933, but has neither admitted nor denied the findings of the investigation. The company will pay more than $6.1 million in fines, destroy the Founder’s Keys in its possession, commit to no future profit from the resale of existing NFTs, and establish a fund to compensate aggrieved investors.
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ZachXBT, a well-known crypto and NFT fraud investigator, originally did this warned of the project when it went live in late 2021.
However, in a post on Bilyeu, the company will do so by following SEC rules and no longer promoting NFTs as financial assets, but instead as “collectibles with utility.”
The overall NFT market has continued to plummet over the past year as even the industry’s most popular projects take a nosedive in the aftermarkets. Many have lost money on their NFT investments. Most notably recently a group of investors from the Bored Ape Yacht Club filed a lawsuit against 30 defendants over the “misleadingly advertised” NFTs.