SEC probes Yuga Labs for securities violations

According to recent reports, Yuga Labs is being investigated by the US Securities and Exchange Commission to determine whether its Ethereum NFTs for the Bored Ape Yacht Club and its native crypto token ApeCoin are unregistered securities.

Yuga Labs in trouble

A recent report by Bloomberg cites an unnamed source to reveal that the regulatory agency is looking into whether the cryptocurrency business violated federal law by issuing NFTs that function like stocks. It is also looking into how the Ethereum-based ApeCoin token, which debuted earlier this year, was distributed. According to the report, Yuga Labs has not yet been charged with any misconduct, and the investigation may not even result in charges. Yuga Labs stated:

“It’s well-known that policymakers and regulators have sought to learn more about the novel world of Web3. We hope to partner with the rest of the industry and regulators to define and shape the burgeoning ecosystem. As a leader in the space, Yuga is committed to fully cooperating with any inquiries along the way.”

One of the most popular NFT initiatives to date is the Bored Ape Yacht Club, with the main collection of 10,000 NFTs first selling to the general public for $190 in Ethereum each. Yuga received around $1.9 million from that sale. The Mutant Ape Yacht Club and the Otherside metaverse game, two follow-up and spin-off projects, subsequently brought in $96 million and $319 million, respectively.

According to data from CryptoSlam, BAYC has also generated secondary trade volume worth close to $2.5 billion. Otherside and Mutant Ape Yacht Club have added an additional $3.35 billion in secondary trade volume to that total. On each of those sales, Yuga Labs receives a royalty fee of 2.5%.

Notably, a proposed class action in July accused Yuga Labs of inappropriately inducing BAYC investors, as TheCoinRise reported.