SEC fines US media company millions for selling unregistered NFTs

The US Securities and Exchange Commission has settled its first NFT enforcement case with Impact Theory, which sold unregistered NFTs.

1 minute & 17 seconds read time

The US Securities and Exchange Commission (SEC) has settled its first-ever enforcement action against a company that was selling unregistered Non-Fungible Tokens (NFTs).

That company is Impact Theory, and according to a recent filing with the Securities and Exchange Commission, the company has been ordered to pay more than $6.1 million in penalties. Impact Theory, the Los Angeles-based media company, raised approximately $30 million from hundreds of investors for its NFT project "Founder's Key".

According to the SEC, Impact Theory wrongfully encouraged investors to purchase the NFTs as a way to invest in the business, and since the company offered investors digital assets through a form of "investment contracts", the NFTs are considered to be "securities". Additionally, the SEC order instructed the company to create a "Fair Fund", which is meant to be a way investors can recover their losses.

Furthermore, the SEC ordered Impact Theory to destroy all of its Founder's Key NFTs and simultaneously eliminate all forms of royalties that may or may not be collected from secondary market sales.

"We will operate our go-forward business consistent with our good faith best understanding of all applicable laws, rules, and regulations, will make clear that all of Impact Theory's digital assets are collectibles with utility within the exciting new landscape of Borderless Entertainment, and will fiercely discourage people from treating our digital assets as anything other than what they are-collectibles with utility. We will have more news on this in the coming weeks and months," writes Impact Theory co-founder Tom Bilyeu on X

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Jak joined the TweakTown team in 2017 and has since reviewed 100s of new tech products and kept us informed daily on the latest science, space, and artificial intelligence news. Jak's love for science, space, and technology, and, more specifically, PC gaming, began at 10 years old. It was the day his dad showed him how to play Age of Empires on an old Compaq PC. Ever since that day, Jak fell in love with games and the progression of the technology industry in all its forms. Instead of typical FPS, Jak holds a very special spot in his heart for RTS games.

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