The United States Securities and Exchange Commission (SEC) has hit another crypto firm with charges of federal securities law violation but this time around, it involves a Non-Fungible Token (NFT) project, Impact Theory.
Los Angeles-based podcasting studio and YouTube channel Impact Theory was indicted by the SEC for “conducting an unregistered offering of crypto asset securities.”
Markedly, this is the regulator’s first enforcement action in an NFT-based project.
Impact Theory Rakes in $30M From NFT Sales
Impact Theory, which is co-founded by Tom Bilyeu, hosts a show on YouTube as well as a podcast that is named after the firm. Its YouTube channel boasts about 3.7 million subscribers and one of it guests from the past is renowned actor Matthew McConaughey.
According to the regulator’s filing, Impact Theory generated approximately $30 million from the sales of three-tier NFT offerings which they tagged “Legendary,” “Heroic,” and “Relentless” to hundreds of investors.
SEC Regards NFT Sales As Securities Laws Violation
Potential investors were encouraged to purchase a “Founders Key” as a pioneer investment in the business. Also, they were promised a profit in the business if Impact Theory succeeds and this is the reason cited by the SEC for classifying the transaction as a violation of securities laws.
“…..the NFTs offered and sold to investors were investment contracts and therefore securities. Accordingly, Impact Theory violated the federal securities laws by offering and selling these crypto asset securities to the public in an unregistered offering that was not otherwise exempt from registration,” the SEC emphasized.
Penalties and Fines For Securities Law Violation
The U.S. regulator has ordered that the company compensate investors who were cajoled into purchasing the NFT.
In the SEC’s opinion, the transactions were illegal unregistered securities offerings. The company has not accepted or denied the allegations but has agreed to a “cease-and-desist order” connected to violating the Securities Act of 1933 and an order to pay $6.1 million in disgorgement, prejudgment interest, and a civil penalty.
Moving forward, Impact Theory will be required to put up a notice of the order on its websites as well as its other social media channels. This will be after it must have destroyed all “Founders Key” in its possession or control.