SEC Charges Stoner Cats with Unregistered Offering of NFTs
The Securities and Exchange Commission (SEC) has taken action against Stoner Cats 2 LLC (SC2), the company behind the ‘Stoner Cats’ animated series, for conducting an unregistered offering of crypto asset securities. The SEC alleges that SC2 raised approximately $8 million through the sale of Stoner Cats NFTs.
In a press release, the SEC stated that SC2’s marketing campaign emphasized the benefits of owning the NFTs, including the option to resell them on the secondary market. The company also highlighted its expertise as Hollywood producers and the involvement of well-known actors in the web series. These claims led investors to expect profits, as a successful web series could increase the resale value of the NFTs.
The project was led by actress Mila Kunis, who collaborated with established NFT creators and an impressive cast that included Ashton Kutcher, Chris Rock, Dax Shepard, Gary Vaynerchuk, Jane Fonda, Michael Bublé, Seth MacFarlane, and Vitalik Buterin.
The SEC’s order states that SC2 violated the Securities Act of 1933 by offering and selling crypto asset securities without registering them. SC2 has agreed to a cease-and-desist order, a $1 million civil penalty, the destruction of all NFTs in its possession, and the publication of the order on its website and social media channels. The order also establishes a Fair Fund to return monies to injured investors.
Hester Peirce and Mark Uyeda, SEC commissioners, dissented from the order, arguing that the project’s activity constitutes fan crowdfunding and should not be subject to securities laws. They highlighted the potential for NFTs to support artists’ monetization efforts and cautioned against discouraging content creators from exploring NFTs as a means of creative expression and building fan communities.
This case follows a similar situation in August, where the SEC brought charges against Impact Theory, a media and entertainment company, for the sale of its ‘Founder’s Keys’ NFTs. Impact Theory was also subjected to a cease-and-desist order and had to pay over $6.1 million in disgorgement, prejudgment interest, and civil penalties.
