March 27, 2024
SEC's Cease-and-Desist Order for Unregistered NFT Offering
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SEC Charges Stoner Cats 2 LLC for Unregistered NFT Securities Offering

Stoner Cats 2 LLC (SC2), the entity responsible for the Stoner Cats animated series, has consented to a cease-and-desist order and additional measures enforced by the United States Securities and Exchange Commission (SEC). This action follows the SEC’s accusations that SC2 conducted an unregistered offering involving crypto-asset securities presented in the form of nonfungible tokens (NFTs).

As per the SEC’s findings, SC2 executed the sale of over 10,000 NFTs, each priced at approximately $800. This sale transpired swiftly, taking only 35 minutes, on July 27, 2021, with the proceeds allocated to fund the production of the series. These NFTs granted purchasers access to the Stoner Cats animated series, featuring the narrative of an elderly woman and her feline companions engaging in cannabis consumption. The first episode of the six-part series debuted merely two days following the NFT sale.

Stoner Cats, initiated by actress Mila Kunis in collaboration with established NFT creators, assembled a notable cast, including Kunis, Ashton Kutcher, Chris Rock, Dax Shepard, Gary Vaynerchuk, Jane Fonda, Michael Bublé, Seth MacFarlane, and Vitalik Buterin. The SEC issued a statement asserting that SC2 promoted the NFTs by insinuating their potential for secondary market value and leveraging the qualifications of the creators and the prominence of the actors. Additionally, the NFTs were structured in a manner that ensured SC2 received a 2.5% royalty from each subsequent sale. Notably, there were at least 10,000 secondary sales, amounting to over $20 million, according to the SEC.

In addition to consenting to the cease-and-desist order, SC2 has agreed to pay a civil penalty of $1 million. A fair fund will be established to facilitate disgorgement and provide restitution to affected investors. Furthermore, SC2 commits to the destruction of all NFTs in its possession or control. Importantly, it should be noted that the company neither admitted to nor denied the charges brought against it.

It is noteworthy that this marks the SEC’s second instance of filing charges related to unregistered securities sales involving NFTs, with the initial case against Impact Theory brought in August.

Image by freepik

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