The Securities and Exchange Commission fined the creators of Stoner Cats non-fungible tokens (NFTs) $1 million for selling unregistered crypto securities.
The fine was paid by Stoner Cats 2 LLC (SC2) as part of a settlement without it admitting or denying the regulator’s findings, the SEC said in statement.
The Stoner Cats animated web series starred actors Mila Kunis, Ashton Kutcher, Jane Fonda and Chris Rock, as well as Ethereum founder Vitalik Buterin. It features house cats that become sentient after being exposed to their owner’s medical marijuana.
A link to the settled SEC order against Stoner Cats 2 LLC is here:https://t.co/EGzpKeYG4G
— Stoner Cats (@stonercatstv) September 13, 2023
Ten Thousand Stoner Cat NFTs Sold Out In 35 Minutes
Ten thousand Stoner Cat NFTs, priced at $800 each, were sold out in 2021 in just 35 minutes. The $8 million raised was used to fund the series, the SEC said.
The SEC charged SC2 with conducting an unregistered offering of crypto asset securities that led investors to expect profits from resales in the secondary market on the back of a successful series.
“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.
The SEC said that after the sale, the Stoner Cats Twitter account tweeted frequently to tout the sales of NFTs in the secondary market and encourage the public to buy them. It added that in a Sept. 2021 tweet Stoner Cats used a meme saying that ”the smartest thing to do during a dip in the crypto markets would be to ‘Buy more ETH & sweep the Stoner Cats floor.”’
As part of the settlement, a fund was set up to return monies that injured investors paid to purchase the NFTs. SC2 also agreed to destroy all NFTs in its possession or control, and to publish a notice of the SEC order on its website and social media channels.
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