The creator of the animated Stoner Cats web series will pay a $1million fine to the US Securities and Exchange Commission (SEC) following charges that it conducted an unregistered offering of crypto asset securities by selling NFTs, according to the regulator today.
One of the first shows to be funded by NFTs, Stoner Cats follows a family of cats voiced by big names from Jane Fonda and Chris Rock, to Ethereum‘s Vitalik Buterin, with the first six episodes only accessible to holders of the NFTs.
Stoner Cats 2 LLC did not admit or deny wrongdoing in settling charges it illegally accumulated more than $8million by selling over 10,400 NFTs for roughly $800 each, which sold out in minutes in July 2021. Stoner Cats has also agreed to destroy all the NFTs it owns and and publish notice of the order on its website and social media platforms.
According to the Gurbir S. Grewal, director of the SEC’s Division of Enforcement: “Regardless of whether your offering involves beavers, chinchillas or animal-based NFTs, under the federal securities laws, it’s the economic reality of the offering – not the labels you put on it or the underlying objects – that guides the determination of what’s an investment contract and therefore a security.
“Here, the SEC’s order finds that Stoner Cats marketed its knowledge of crypto projects, touted that the price of their NFTs could increase and took other steps that led investors to believe they would profit from selling the NFTs in the secondary market. It’s therefore hardly surprising, as the order finds, that Stoner Cats sold its entire supply of NFTs in just 35 minutes, generating proceeds of over $8 million, most of which were then resold – not held as collectibles – in the secondary market within months.”
Carolyn Welshhans, associate director of the SEC’s Home Office, added: “Registration of securities, including crypto asset securities, protects investors by providing them with disclosures so they can make informed investing decisions.
“Stoner Cats wanted all the benefits of offering and selling a security to the public but ignored the legal responsibilities that come with doing so.”
