Stoner Cats NFTs Charged by the SEC as Unregistered Securities

After the regulatory actions against cryptocurrencies and crypto firms, it seems like it’s time for non-fungible tokens. The U.S. securities regulator reportedly charged a well known NFT project, Stoner Cats NFTs, for unregistered offerings. This marks the second instance within a month when the regulators went after an NFT project. 

According to the September 13 filing of the Securities and Exchange Commission (SEC), the regulator charged Stoner Cats 2, the creator company behind web-series based Stoner Cats NFTs collection. The filing noted the allegations against the digital art piece collection of being an unregistered offering. 

Though Stoner Cats 2 neither denied nor admitted the allegations against it, the company agreed to pay a civil penalty of $1 Million.

In addition, a “Fair Fund” will be created intended to return funds to those investors who were “injured” in purchasing the NFTs. The company also agreed to destroy the NFTs under its possession. It will also publish the order’s notice through its official websites and channels across different social media platforms, the filing added. 

The company raised about $8 Million in funds from investors that later used to finance a namesake animated web series dubbed Stoner Cats. The collection was said to have 10,000 art pieces worth $800, and it was sold out within an hour. 

Significant Marketing Campaign Behind Stoner Cats NFTs

The marketing campaign touting the benefits of owning Stoner Cats NFTs resulted in significant sale of non-fungible tokens. The company promoted the owners can have tremendous profits after reselling NFTs in the secondary market. 

Investors and buyers are made to believe that they can have significant returns over their purchases. The NFTs avails the exclusive access to the web-series of six-episodes featuring prominent personalities including Ashton Kutcher, Mila Kunis, Chris Rock, Jone Funda, NFT influencer Gary Vaynerchuk and Ethereum creator Vitalik Buterin. 

The idea was simple: more the popularity of the show will lead to more demand, which eventually raises the calls for its availability. For this, people would need Stoner Cats NFTs and hence, the secondary market will facilitate more price of the same NFT piece since it unlocks the exclusive animated web series starring celebrities. 

“The SC2 team emphasized its expertise as Hollywood producers, its knowledge of crypto projects, and the well-known actors involved in the web series, leading investors to expect profits because a successful web series could cause the resale value of the Stoner Cats NFTs in the secondary market to rise,” the SEC noted. 

Stoner Cats 2 received 2.5% in royalty everytime when sales of NFTs take place. It continues even with each secondary market transaction related to the NFTs. Since the company’s marketing involves promoting buy and sell of the NFTs in the secondary market, the same 10,000 NFTs were likely to increase the revenue to $20 Million. 

SEC’s order alleged that “SC2 violated the Securities Act of 1933 by offering and selling these crypto asset securities to the public.” It considered the sale as an “unregistered offering that was not exempt from registration.”

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