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Regulatory pressure in the cryptocurrency markets is increasing exponentially, and the SEC is now closely looking into NFTs as well. Weeks ago, we reported on the SEC’s first NFT-focused enforcement action, the Unregistered Securities case. Today, the second one arrived.
Last Minute SEC Crypto Lawsuit
The Securities and Exchange Commission announced today that it has taken action regarding Stoner Cats NFTs. The issuers of the collection, which raised approximately $8 million from investors to finance a web series called Stoner Cats, are accused of conducting an unregistered securities offering.
According to the SEC’s decision, on July 7, 2021, SC2 sold over 10,000 NFTs to investors, each for approximately $800. During the issuance of the collection, specific benefits were advertised to investors, and demand was generated through this marketing.
The SEC stated the following;
“The SC2 team claimed that the support of Hollywood producers could increase the value of Stoner Cats NFTs in the secondary market. Additionally, the decision highlights that SC2 structured the Stoner Cats NFTs to provide a 2.5% royalty to SC2 for every secondary market transaction in NFTs. Buyers spent over $20 million in at least 10,000 transactions. According to the SEC’s decision, SC2 violated the Securities Act of 1933 by offering and selling these crypto asset securities to the public through an unregistered, non-exempt offering.”
The team will pay a $1 million penalty and refund their defrauded investors. SC2 also agreed to destroy all NFTs in its possession or control. We might see similar cases opened against more NFT projects in the near future. The expectation of future profits while marketing many collections was the main focus.