The United States Securities and Exchange Commission (SEC) has charged the creators of the project Stoner Cats with selling unregistered securities around the launch of NFTs in 2021.
Stoner Cats 2 LLC, the company behind the NFT-based cartoon project, agreed to a cease-and-desist order and will pay a $1 million civil penalty without admitting fault. The company will also destroy any NFTs that it still holds, and establish a “Fair Fund” to refund investors who purchased the NFTs in the primary sale.
Stoner Cats was created by Orchard Farm Productions, the production studio of actress Mila Kunis, who also voiced one of the feline characters in the cartoon series.
According to the SEC, the company raised $8 million in the sale, as users purchased Ethereum NFTs as entrance tickets to show. The NFTs let them watch a web series in which five cats—and their owner—get high.
The show also featured the voices of big-name celebrities like Kunis’ husband Ashton Kutcher, actress Jane Fonda, “Family Guy” creator Seth McFarlane, and comedian Chris Rock. Playing the role of a taxidermied feline, Ethereum creator Vitalik Buterin also made his Hollywood debut.
These A-list celebrities were not named in today’s press release, although the SEC alleges that their brands were leveraged as part of the NFT marketing campaign.
According to the agency, the NFTs sold out in just 35 minutes and the company had “highlighted specific benefits of owning them,” including the ability to resell them on secondary markets—which would earn the company a royalty fee.
“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,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
Wednesday’s move is the latest against celebrities and notable influencers who offered NFTs for sale. In August, Impact Theory—a media company run by entrepreneur Tom Bilyeu—had to pay $6 million in a settlement over its Founder’s Key collection, which also had to be destroyed as part of the agreement.
Source: Crypto News