The United States Securities and Exchange Commission (SEC) took its first enforcement action against a player in the non-fungible token (NFT) sector charging Impact Theory of engaging in an unregistered securities offering.
The financial regulator claimed that Impact Theory – a Los Angeles-based media and entertainment giant – sold NFTs worth around $30 million, while also guaranteeing their value appreciation. However, the NFTs did not represent shares of the company and did not pay dividends of any kind to the purchasers.
SEC charges NFT issuer with unregistered securities
The SEC’s charges focus on three levels of Impact Theory’s NFTs called “Founder’s Keys” — “Legendary,” “Heroic,” and “Relentless.”
According to Impact Theory, buying out the founder’s key is equivalent to a form of investment in the company. It claims that anyone who becomes an “investor” by obtaining these keys will receive a substantial reward from their initial investment if the company achieves significant success.
The SEC found that Impact Theory often compared their ambitions to those of Disney, Call of Duty, and YouTube to reflect their trajectories and managed to raise $30 million from investors. The regulator alleged that the NFTs offered by Impact Theory were security investment contracts, following which the company indulged in sale of unregistered securities through the offering of these NFTs.
“Today we charged Impact Theory LLC, a media and entertainment company headquartered in Los Angeles, with allegedly conducting an unregistered offering of crypto asset securities in the form of NFTs. Impact Theory raised nearly $30 million from hundreds of investors.
The settlement covers the waiver, prejudgment interest and civil penalty. Additionally, a Fair Fund will be set up to compensate affected investors. The company is also required to destroy all Founder’s Keys it holds, promote orders on its website and online platforms, and waive any future secondary market transaction royalties.
On-chain crypto explorer ZachXBT warning Users talked about Impact Theory in October 2021 and accused it of running a growth mindset pyramid scheme. He also called it “the worst NFT cash grab ever”.
issue resolved
Tom Bleu, CEO of Impact Theory announced Entering into a settlement with the SEC to resolve the investigation.
In the latest statement, the executive expressed disappointment over the SEC’s decision to comprehensively question “the technological innovations that make digital assets possible through the lens of securities laws,” but said the company remains open about the future of this industry in the country. I remain optimistic.
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source: cryptopotato.com
