The Securities and Exchange Commission charged Los Angeles-based media and entertainment company Impact Theory with conducting an unregistered offering of crypto asset securities. The action is the first enforcement action of its kind against NFTs.
The securities took the form of non-fungible tokens (NFTs) called Founder’s Keys. Impact Theory, an LA media company, raised approximately $30 million from hundreds of investors, across the United States, through the NFT offering from October to December 2021.
Impact Theory Touted the NFTs as Investments Into the Business
Strangely, Impact Theory touted its non-fungible tokens as “investments into the business,” according to the SEC’s statement.
The firm allegedly lured investors with claims that the investors would profit if the company succeeded in its goal to “build the next Disney.”
Both these factors spell trouble, from a legal standpoint. Two characteristics of a security, under the Howey Test, are the “expectation of profit” and the “effort of others.”
Learn more about how the US Securities and Exchange Commission defines a security: What Is the Howey Test and How Does It Impact Crypto?
Impact Theory appears to have made such interpretations markedly easier with its hype the NFTs. In a line quoted in the SEC’s order, Impact Theory stated:
“Now as we’re building out this IP, imagine that you could’ve gotten in on Disney when they were doing Steamboat Willie, and that’s
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Author: Josh Adams
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