The world of NFTs or non-fungible tokens was brought under a fatal glare when Securities and Exchange Commission targeted Stoner Cats 2 (SC2), an ambitious NFT project tied to an animated web series graced by the voice talents of stars like Mila Kunis and Ashton Kutcher. The SEC order released on Wednesday claimed that the royalty-bearing NFTs facilitating the series’ finance were actually unregistered securities, offered unlawfully.
This comprehensive case saw SC2 allegedly amassing a whopping $8 million via 100,000 Stoner Cat NFT sales. These NFTs embodied characters from its original animated web show concept, a sales event that commenced in July 2021. Furthermore, the company’s public glorification of its digital art collectibles both before and after the collection’s debut sale seemingly tied the success of the show to these NFTs’ value.
This connection, according to SEC, sparked a rise in investors’ expectation for making a possible profit. Consequently, it resulted in the SEC accusing the company of failing to register Stoner Cats NFT offerings even though it indulged in multiple promotional drives. With the NFTs getting traded on secondary market, SC2’s lively promotions further amplified following the offering.
Interestingly, the commission also claimed that SC2 swayed Stoner Cats NFT holders to trade their tokens, via a luring 2.5% royalty for every secondary-market transaction the collectibles featured in. This purported encouragement led stakeholders to buy and sell NFTs in a sizable amount of secondary transactions, over 10,000, generating a staggering $20 million. In a surprising revelation, even before the first episode of the Stoner Cats web series saw the light of day, at least 20% of these tokens had allegedly been resold.
However, in the aftermath of this scrutiny, SC2 is said to pay a $1 million fine and exterminate all the remaining NFTs in its hold pursuant to the order. It also reportedly agreed to create a reimbursement fund for the token investors.
Yet, SC2 isn’t the lone entity to be on the receiving end of this strategic crackdown by regulators. The SEC had earlier cracked the whip against NFT maker Impact Theory a month ago, busting an alleged securities offering from this project.
This series of actions suggest a larger pattern forming, spotlighting the need for stricter regulatory frameworks around the volatile and chaotic world of NFTs, to ensure safe, well-regulated investments and growth. As this space continues to evolve, defining the boundaries between creativity, investor representation, and regulatory compliance becomes increasingly important.
Source: Coindesk
