The Securities and Exchange Commission (SEC) has charged Stoner Cats 2 LLC with an unregistered offering of NFTs. According to the regulator, the NFTs creator raised $8 million from investors in a project that financed the animated web series show dubbed Stoner Cats. Ashton Kutcher, Chris Rock, Jane Fonda, Mila Kunis and Ethereum co-founder Vitalik Buterin were some of the notable personalities to feature in the show (via voiceovers).
The SEC’s complaint noted that Stoner Cats was not exempt from registration, thus the offering violated the US securities laws. Gurbir S. Grewal, SEC’s director of Enforcement, said in a press release: “Regardless of whether your offering involves beavers, chinchillas or animal-based NFTs, under the federal securities laws, it’s the economic reality of the offering – not the labels you put on it or the underlying objects – that guides the determination of what’s an investment contract and therefore a security.”
The SEC’s order said the charge shows that it’s not about what the NFTs are based on or underlying asset, but rather the “economic reality of the offering.” It was also noted that Stoner Cats’ fire sale that saw the entire collection sold within minutes was a result of the hype generated after the company touted the NFTs’ potential as an investment to buyers.
In response to the charges, Stoner Cats have been ordered to refund investors and pay a $1 million civil penalty. The platform is also to destroy their NFT collection and although it didn’t admit or deny the SEC’s charges, they agreed to a cease-and-desist order.
The action against Stoner Cats follows a similar charge against Impact Theory, a Los Angeles-based company. As CoinJournal reported, the company neither admitted nor denied the charges, but agreed to a $6.1 million fine.
Observers and market experts have reacted to the latest SEC action, with many saying Impact Theory’s charges were “clear” and that could present a worry for other NFT projects. However, the charges against Stoner Cats are a little vague. The Gorilla Labs founder posted on Twitter that the SEC’s strike on Stoner Cats was worrisome for all NFT collections and that while Impact Theory’s violations were clear, this time around is quite vague.