A recent lawsuit against Los Angeles-based media company Impact Theory has reached a settlement with the Securities and Exchange Commission (SEC), involving the payment of a $6 million fine. The SEC fined LA-based Impact Theory after a settlement was reached in response to allegations made by the SEC regarding the company’s NFTs sold as unregistered securities. The SEC further demanded the destruction of all Founder’s Key NFTs associated with the company.
Founder Key Collection’s before SEC fined Impact Theory
As of August 28th, the Founder’s Key collection remains accessible on Opensea, a prominent NFT marketplace. The NFTs sold within the collection were valued at a floor price of 0.039 Ethereum, equivalent to around $64. As per OpenSea’s Data, the company has generated a total trading volume of $5.4 million since the launch. Another noteworthy fact is that Tom Bilyeu, an entrepreneur and influential figure in social media, founded Impact Theory.
SEC Allegations and Settlement Announcement
The SEC’s recent announcement revealed that Impact Theory had uplifted approximately $30 million in funds from a diverse range of investors, including some based in the United States. The allegations centre around the company’s actions between October and December 2021. During this period, Impact Theory introduced and conducted transactions involving three distinct tiers of NFTs named Founder’s Keys, categorized as “Legendary,” “Heroic,” and “Relentless.”
Promotion of NFTs as Investment Opportunities
The SEC’s findings indicate that Impact Theory actively marketed these NFTs as an opportunity for direct investment in the company. The company suggested that purchasing a Founder’s Key NFT could yield returns in the event of the firm’s success. They frequently compared their aspirations with the trajectory of major entertainment conglomerates like Disney.
Impact Theory’s Response and Settlement Terms after SEC fine
The SEC’s investigation has concluded that these NFTs are equivalent to security investment contracts. Consequently, the SEC asserts that Impact Theory engaged in the offering of unregistered securities when it conducted transactions involving these NFTs.
Impact Theory has consented to a cease-and-desist order without conceding or challenging the allegations in light of the SEC’s findings. This order acknowledges the company’s violation of the registration regulations outlined in the Securities Act of 1933. This action led Impact Theory to agree to a financial settlement exceeding $6.1 million.
Comprehensive Settlement Details
The SEC settlement’s components include settling the funds obtained from the transactions, personal interests, and an imposed civil penalty. Furthermore, the establishment of a Fair Fund is in progress to facilitate the return of funds to the investors who have been affected. Impact Theory is also required to destroy all Founder’s Keys under its control and publicize the cease-and-desist order across its online platforms. Moreover, Impact theory is ordered to voluntarily cease any potential future secondary market transaction royalties associated with the Founder’s Keys.
Conclusory Regulatory Oversight and Future Outlook
The SEC investigated this matter by its New York Regional Office, with the invaluable support of the Enforcement Division’s Crypto Assets and Cyber Unit (CACU) and the Division of Economic and Risk Analysis.
In conclusion, the recent $6 million settlement and NFTs sold issue between Impact Theory and the SEC shows how important it is to follow legal frameworks in the constantly changing world of NFTs and digital assets. This incident should remind everyone in the NFT space to stay alert and aware of how their acts might affect the law.
Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. Readers are encouraged to consult legal professionals for advice specific to their circumstances.
