A few hours ago, the SEC charged Stoner Cats 2 LLC for conducting an “unregistered offering of crypto asset securities” in the form of disguised NFTs that raised approximately $8 million from investors to fund the animated web series Stoner Cats. Gurbir Grewal, the Director of the Division of Enforcement at the SEC, asserted that regardless of whether offerings involved beavers, chinchillas, or animal-based NFTs, the federal laws consider only the economic reality of the offering and not the labels put on them. Despite the SEC charges, CoinGecko pointed out that the floor price of the NFTs was hovering around 0.069 ETH, up by 267%.
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Right after the SEC imposed charges, the creator of the animated series Stoner Cats agreed to pay $1 million to settle the charges that it offered NFTs that were unregistered securities. The series featured actors Mila Kunis and Ashton Kutcher, along with Chris Rock and Ethereum co-founder Vitalik Buterin. To watch Stoner Cats, viewers had to purchase the showâs original NFT artwork. The SEC alleged that the company illegally raised funds by selling more than 10,000 NFTs at about $800 each within 35 minutes on July 27, 2021. Despite settling with the agency, the entity didnât admit or deny any wrongdoing.
The $1 million fine paid by Stoner Cats will be used to create a âFair Fundâ to compensate âinjured investorsâ who bought Stoner Cats NFTs, the SEC said. Furthermore, as a condition of todayâs settlement, Stoner Cats also agreed to destroy all NFTs in its possession. This, in effect, could jeopardize the fate and functionality of the NFT animated series.
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SEC is Playing “Dress Up”: Crypto Community
Towards the end of August, the SEC alleged that Impact Theory raised around $30 million from investors via its NFT offerings that were not registered with the agency. The firm agreed to pay more than $6 million to settle the allegations. Drawing parallels between the two cases, Preston Byrne, Partner at Brown Rudnick, posted,
“Impact Theory was an obvious example of an entrepreneur trying to dress up an investment contract as an NFT. Stoner Cats is an example of the SEC trying to dress up a collectible as an investment contract.”
In fact, Ripple’s Chief Legal Officer also went on to question the binding nature of the latest Stoner Cats settlement. He labeled the resolution “binding on no one” and likely just a “PR stunt.” In fact, he contended that the SEC often loses its cases when they are seriously challenged in court. Ripple CTO David Schwartz, on the other hand, said,
“Settle for single-digit millions or pay double digit millions to get a pyrrhic victory in three years. This should not be seen as a win for anyone.“
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