The U.S. Securities and Exchange Commission (SEC) has turned its attention to Impact Theory, a media and entertainment company based in Los Angeles, filing charges against them for the sale of unregistered securities in the form of crypto asset non-fungible tokens (NFTs).
The charges relate to the company’s offering of NFTs and its subsequent raising of $30 million from various investors, including those from the United States.
Charges and Allegations Against Impact Theory
The SEC alleges that between October and December 2021, Impact Theory introduced a series of NFTs named “Founder’s Keys” in three tiers: “Legendary,” “Heroic,” and “Relentless.” The company encouraged potential investors to view these NFTs as an investment opportunity in their business, promising substantial returns akin to the success of Disney.
However, the SEC claims that this offering violated the Securities Act of 1933 by selling investment contracts without proper registration, thereby constituting the sale of unregistered securities.
Antonia Apps, Director of the SEC’s New York Regional Office, emphasized that unregistered offerings deprive investors of vital protections established by securities laws, which offer transparency and safeguards against fraudulent activities.
Impact Theory’s Response
In response to the charges, Impact Theory agreed to a cease-and-desist order without further contest. Acknowledging their violation of the Securities Act of 1933, which mandates the registration of investment offerings, the company has taken responsibility for its actions and the resulting consequences.
Settlement Terms
Consequently, as part of the settlement, Impact Theory will pay a total of over $6.1 million, encompassing the return of the gains acquired, prejudgment interest, and a civil penalty. The order further mandates the establishment of a fair fund to compensate investors who purchased the “Founder’s Keys” NFTs.
In addition, Impact Theory has committed to destroying all held “Founder’s Keys” NFTs, and relinquishing any potential royalties associated with future secondary market sales of these tokens.
However, the company has also been directed to publicly announce the SEC order on its official websites and social media platforms to ensure that users are informed about the regulatory developments.
Implications and Compliance Reminder
Moreover, the Impact Theory case underscores the importance of proper compliance for cryptocurrency companies, particularly amid uncertain regulatory landscapes.
Further, by accepting responsibility for their actions, Impact Theory has displayed a remarkable level of transparency and accountability, contributing to the establishment of a trustworthy and secure environment within the industry.
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