SEC Charges Impact Theory in First NFT-Related Lawsuit Over Unregistered Token Sales 

The Securities and Exchange Commission (SEC) has charged Los Angeles-based media institution Impact Theory with offering and selling unregistered securities successful the signifier of crypto plus tokens. Notably, this marks the SEC’s archetypal suit targeting an NFT offering.

SEC Sues Impact Theory Over $30M successful NFT Sales

From October 2021 to December 2021, Impact Theory raised astir $30 cardinal by selling non-fungible tokens (NFTs) called Founder’s Keys without filing a registration connection oregon qualifying for an exemption, the SEC complaint details. The SEC recovered that the institution violated Sections 5(a) and 5(c) of the Securities Act.

The SEC bid states that Impact Theory offered and sold NFTs known arsenic Founder’s Keys astatine 3 pricing tiers, describing them arsenic an concern accidental and promising “tremendous value” to purchasers. Impact Theory compared the concern imaginable to investing aboriginal successful palmy companies similar Disney and Youtube, claiming the proceeds would money concern maturation to enrich token holders. However, the institution did not registry the tokens arsenic securities oregon suffice for an exemption.

“Absent a valid exemption, offerings of securities, successful immoderate form, indispensable beryllium registered,” Antonia Apps, manager of the SEC’s New York Regional Office stated successful the regulator’s press release. “Without registration, investors of each types are deprived of the protections afforded them by the robust disclosures and different safeguards agelong provided by our securities laws.”

Impact Theory sold astir 14,000 Founder’s Keys to astatine slightest hundreds of investors crossed the U.S., raising astir $30 cardinal worthy of ether cryptocurrency. The institution pooled the proceeds successful a crypto wallet and utilized immoderate funds to wage vendors. After the unregistered offering began, Founder’s Keys besides traded connected secondary markets wherever Impact Theory programmed the tokens to gain royalties from sales.

As a effect of failing to registry the securities oregon suffice for an exemption, the SEC recovered Impact Theory violated national securities laws. The institution agreed to wage implicit $6 cardinal successful disgorgement, interest, and penalties without admitting oregon denying the findings. Impact Theory besides agreed to destruct tokens successful its possession and revise the NFT astute declaration codification to region royalties.

What bash you deliberation astir the SEC suing Impact Theory implicit its NFT sales? Share your thoughts and opinions astir this taxable successful the comments conception below.