U.S. SEC Charges Firm for Offering Crypto Asset Securities as NFTs

On August 28, the U.S. Securities and Exchange Commission (SEC) published a press release noting that it has charged Impact Theory LLC with carrying out an unregistered provision of crypto asset securities as purported non-fungible tokens (NFTs).

The firm allegedly raised about $30 million from numerous investors through the offering. The firm provided and sold three tiers of NFTs, called Founders Keys, and allegedly encouraged potential investors to see the purchase as an investment into the business.

Impact Theory stated that investors would profit by buying the NFTs if the firm was successful in its efforts. The firm said it was attempting to “build the next Disney” towards delivering “tremendous value” to those who buy the NFTs.

The SEC claimed that the NFTs provided and sold were investment contracts and therefore securities, amounting to a violation of federal securities laws:

“Accordingly, Impact Theory violated the federal securities laws by offering and selling these crypto asset securities to the public in an unregistered offering that was not otherwise exempt from registration,” reads the press release.

The firm did not admit or deny the SECs findings but agreed to a cease-and-desist order due to its violation of registration provisions of the Securities Act of 1933. The SEC has ordered it to pay an aggregate of over $6.1 million in disgorgement, prejudgment interest, and a civil penalty.

“Impact Theory agreed to destroy all Founder‘s Keys in its possession or control, publish notice of the order on its websites and social media channels, and eliminate any royalty that Impact Theory might otherwise receive from future secondary market transactions involving the Founder’s Keys,” reads the press release.