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