The U.S. Securities and Exchange Commission (SEC) has recently taken action against the creators of Stoner Cats, alleging an unregistered offering of crypto asset securities in the form of NFTs. These NFTs were intended to finance the production of the animated web series “Stoner Cats.”
Star-Studded Animated Series
Stoner Cats is not just any animated series. It portrays cats that consume cannabis and features voiceovers from a star-studded cast including Mila Kunis, Seth MacFarlane, Ashton Kutcher, Jane Fonda, Vitalik Buterin, and Chris Rock. The series quickly gained attention and traction, with its first episode being released as 10,420 NFTs on July 28, 2021. These NFTs were snapped up in a mere 30 minutes, accumulating approximately $8 million in sales.
Furthermore, the creators of “Stoner Cats” implemented a 2.5% royalty fee for each NFT transaction on the secondary market. This strategy resulted in over 10,000 transactions, with a total expenditure surpassing $20 million.
SEC’s Stance on NFTs as Securities
The SEC’s involvement stems from its determination that “Stoner Cats” violated the Securities Act of 1933. The regulatory body contends that the offering and sale of the NFTs were, in essence, securities transactions. However, these transactions were conducted without the requisite registration.
The creators of “Stoner Cats” have since cooperated with the SEC and have agreed to a cease-and-desist order. In addition to halting any further unregistered offerings, they will also be responsible for paying a civil penalty amounting to $1 million.
The Establishment of a Fair Fund
In a move to safeguard the interests of investors, a Fair Fund will be set up. This fund is designed to offer refunds to those investors who may have been adversely affected by the unregistered NFT offering.
In conclusion, the SEC’s action against “Stoner Cats” underscores the regulatory body’s commitment to ensuring that all securities offerings, whether traditional or in the evolving realm of NFTs, adhere to established laws. It serves as a reminder to creators and investors alike to be vigilant and informed about the legal implications of their endeavors in the rapidly expanding world of digital assets.
