The SEC has brought down the hammer on another crypto venture for an unregistered offering of digital assets.
This time, the commission has charged Impact Theory LLC for conducting an unregistered offering of NFTs. The Los Angeles-based media and entertainment company raised over 30 million dollars from numerous investors across the US through these offerings.
The US Securities and Exchange Commission released an official order regarding the case. The order states that between October and December 2021, Impact Theory sold three tiers of NFTs. These NFTs were called Founder’s Keys and divided into three categories – Legendary, Heroic, and Relentless.
According to the order, Impact Theory instigated investors to see the NFT purchase as an investment into the company. Impact Theory even states that investors will profit from the purchase if the company becomes successful.
Moreover, it is noted that Impact Theory displayed its efforts as building the next Disney. Thus, the company promised to deliver massive value to the Founder’s Key holders if it was successful.
The SEC believes that since the NFTs sold to the investors were investment contracts, they should be treated as securities. Thus, Impact Theory broke federal securities laws by selling these asset securities to the public without registering the offering.
Antonia Apps, the Director at the SEC’s New York Office, talked about the latest order. According to Apps, the offering of securities, in any way or form, must be registered, barring a valid exemption. Not registering the same deprives investors of protection afforded by the disclosures and safeguards offered by securities laws.
For now, Impact Theory has agreed to a cease-and-desist order that found the company violating the 1933 Securities Act. The company is ordered to pay a fee of over 6.1 million dollars in civil penalty, disgorgement, and prejudgment interest.
The order has also established a Fair Fund to return the funds the investors spent to buy the NFTs. The company has agreed to destroy every Founder’s Keys under its ownership while levying any royalty received from secondary market transactions as well.