The SEC, the U.S. financial markets regulator, has taken legal action against Stoner Cats 2 LLC, accusing the company of selling NFTs without complying with applicable regulations. As a result, Stoner Cats 2 LLC will be forced not only to destroy all its NFTs, but also to pay a fine of one million dollars.
SC2 under SEC spotlight after sale of unregistered NFTs
The meteoric rise of non-fungible tokens (NFTs) is sparking heated debate and drawing the attention of numerous players. While exciting, this innovation is also beginning to be scrutinized by the regulatory authorities.
Stoner Cats 2 LLC (SC2), famous for its web series, is currently in the eye of the storm. The company is sued by the Securities and Exchange Commission (SEC) for allegedly conducting an unregistered crypto asset offering through the sale of NFT.
To finance their animated series “Stoner Cats, SC2 would have raised about $8 million in July 2021 by offering more than 10,000 of these tokens for sale, each priced at around $800. Amazingly, all the NFTs found takers in just 35 minutes.
SC2 forced to cease operations and pay substantial fine
The SEC indicated that the NFT promotional campaign of SC2 highlighted the potential benefits of owning these assets, including the possibility of reselling them on the secondary market.
The regulator took a close look at the situation and concluded that SC2 had set up a system enabling the company to earn a commission of 2.5% on each NFT transaction on the secondary market. This strategy, along with other aspects of their marketing campaign, led the SEC to consider the SC2 as a sale of securities.
Rather than contesting or admitting the organization’s allegations, SC2 has decided to cooperate by accepting a cease-and-desist order, accompanied by a $1 million fine, as well as the creation of a dedicated fund to compensate affected investors. In addition, they undertook to destroy all NFTs in their possession.
In the SEC’s merciless battle against the crypto sector, no company is spared. Gary Gensler doesn’t seem ready to give up until he’s seen all the companies fold.
As a journalist at Coinpri, I’ve been captivated by the world of bitcoin and blockchain since 2020. The decentralized aspect of Bitcoin particularly piqued my interest. Since then, I’ve been working constantly to spread my knowledge, hoping one day to see a world where everyone fully enjoys their financial freedom.
