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The SEC seeks to compensate investors in Mila Kunis-backed Stoner Cats NFTs, which were deemed an unregistered securities offering that violated federal law.
Stoner Cats Investors to Be Compensated Under SEC’s Proposed Fund Plan
The U.S. Securities and Exchange Commission (SEC) has announced a proposed plan to distribute funds collected from Stoner Cats 2 LLC following enforcement actions over securities violations.
In a court filing on Wednesday, the SEC detailed that the company conducted an unregistered sale of non-fungible tokens (NFTs). Stoner Cats 2 LLC, the company behind the NFT-funded animated web series “Stoner Cats,” was notably backed by actress Mila Kunis. The animated web series featured voice talents from Kunis, Ashton Kutcher, and Chris Rock. The company sold 10,320 NFTs to the public for $800 each, amassing $8.2 million in proceeds. The SEC determined the offering was a sale of crypto asset securities and violated Sections 5(a) and 5(c) of the Securities Act of 1933. The company was fined $1 million, and a Fair Fund was created to compensate impacted investors.
Investors holding or selling these NFTs before Sept. 12, 2023, are eligible for compensation through a $1 million Fair Fund established from civil penalties. The plan outlines detailed procedures for filing claims, verifying eligibility, and allocating funds. Eligible claimants must submit validated documentation, and payments will only be issued for claims above $20. Additionally, wallets involved in transactions will undergo strict screening for compliance with U.S. sanctions. Any undistributed funds will revert to the U.S. Treasury. The fund administrator and tax administrator oversee claim processing, distribution, and compliance, while maintaining transparency through reports and public notices.
The SEC’s order highlighted that Stoner Cats’ marketing campaign emphasized potential profits from secondary market sales, leading investors to expect financial returns. Without admitting or denying the findings, Stoner Cats 2 LLC agreed to a cease-and-desist order, a $1 million civil penalty, and the destruction of all NFTs in its possession.
“The Net Available Fair Fund is comprised of the $1,000,000.00 in civil money penalties collected from the respondent, plus any interest and income earned thereon, less taxes, fees, and expenses.” the regulator detailed, adding:
The proposed plan provides for the distribution of the net available fair fund to compensate investors who were harmed by the respondent’s violations … in connection with the unregistered sale of crypto assets offered and sold as securities called Stoner Cats NFTs.
These NFTs must be “purchased or acquired from Stoner Cats in the offering on July 27, 2017, and either held through or sold on or before September 12, 2023,” the SEC stated. Public comments on the proposed plan are invited within 30 days. The plan, along with the methodology for fund distribution, is available on the SEC’s website, with comments accepted electronically or in writing. Submissions will be made publicly accessible.