RRUPDATES📍: NFTs Under Attack By SEC🎨

In a significant development, SEC has filed charges against Impact Theory.

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The R Roundup
August 28, 2023

RRUPDATES📍: NFTs Under Attack By SEC🎨

In a significant development, SEC has filed charges against Impact Theory, LLC, a prominent media and entertainment firm headquartered in Los Angeles.

The SEC alleges that Impact Theory conducted an unregistered offering of cryptocurrency securities in the form of non-fungible tokens (NFTs), raising a substantial sum of approximately $30 million from hundreds of investors, including individuals across the United States.

According to the SEC's findings, Impact Theory launched this unregistered NFT offering between October and December 2021, promoting three tiers of NFTs known as "Founder’s Keys" under the titles "Legendary," "Heroic," and "Relentless."

The SEC order asserts that Impact Theory actively encouraged potential investors to consider the acquisition of these Founder's Keys as a form of investment in the company. Investors were told they could potentially profit from their purchases if Impact Theory's ventures proved successful. Notably, Impact Theory made bold claims, comparing itself to "the next Disney" and promising "tremendous value" to Founder’s Key purchasers if it achieved its goals.

Consequently, the SEC determined that the NFTs sold by Impact Theory constituted investment contracts and therefore qualified as securities. As a result, Impact Theory is alleged to have violated federal securities laws by offering and selling these crypto asset securities to the public without proper registration or exemption.

Antonia Apps, the Director of the SEC's New York Regional Office, commented on the situation, stating, "Absent a valid exemption, offerings of securities, in whatever form, must be registered. Without registration, investors of all types are deprived of the protections afforded them by the robust disclosures and other safeguards long provided by our securities laws."

In a resolution, Impact Theory, without admitting or denying the SEC’s findings, has agreed to a cease-and-desist order acknowledging its breach of registration provisions as outlined in the Securities Act of 1933.

As part of this settlement, Impact Theory is required to pay a total of more than $6.1 million, covering disgorgement, prejudgment interest, and a civil penalty. Additionally, the order establishes a Fair Fund aimed at reimbursing the investors who purchased the NFTs. Impact Theory has also committed to destroy all Founder’s Keys within its possession or control, publicize the order on its websites and social media platforms, and relinquish any royalties it might otherwise obtain from future secondary market transactions involving the Founder’s Keys.

As a reminder, this is not a trading signal or investment advice; it is an opinion, and each trader/investor should know and understand the risks of trading cryptocurrencies.

This should not be regarded as financial advice; feel free to familiarise yourself with our NFA disclaimer.

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