- The U.S. SEC accused Impact Theory of issuing unregulated securities.
- The regulator said the nonfungible tokens issued by the company qualified as investments contracts.
- The company reached a $6 million settlement with the regulator.
The U.S. Securities and Exchange Commission on Monday announced its first enforcement action against NFTs after it accused Impact Theory of offering investment contracts to hundreds of investors. The wall secret regulator claims the non-fungible tokens the company offered to the investors were investment contracts, and thus unregistered securities.
According to the SEC, Impact Theory offered three tiers of NFTs, which it told investors to view as investments in its business. The SEC said the company should have registered the tokens with it before offering them to the investors.
The LA-based media and entertainment company raised $30 million from investors who purchased the NFTs. The company said the NFTs were part of its plans to build the company into “the next Disney.” However, the regulator claims the company sold the NFTs under promises of massive returns on their value.
Impact Theory agreed to a $6 million settlement with the SEC to clear the allegation. The settlement also includes a cease and desist order that does not compel Impact Theory to admit to or deny the allegations.
This recent action by the SEC represents the first time the agency has gone after NFT offerings as part of a wider clampdown on crypto offerings. The regulator has since last year been going after NFT projects and creators.
Impact Theory said it would focus on the business even though it noted it was disappointed with the SEC decision. “Although we are disappointed that the SEC has chosen to broadly question the exciting technical innovations that make digital assets possible through the lens of the securities laws, we remain optimistic for the future of this industry in the United States, and hope we remain the global home of innovation,” the company said.
Elsewhere, the SEC has drawn criticism from Republican SEC Commissioners Hester Peirce and Mark Uyeda. The commissioners disagreed with how the regulator applied the investment contract rule to NFTs. “The NFTs were not shares of a company and did not generate any type of dividend for the purchasers,” the commissioners said.
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