The US Securities and Exchange Commission (SEC) announced on Wednesday that it has sued web3 series creator Stoner Cats over sales of unregistered non-fungible tokens (NFT), generating over $8 million from investors.
The indictment stated that Stoner Cats 2 LLC (SC2) sold over 10,000 NFTs to investors on July 27, 2021, at a price of $800 per person, selling out in less than 35 minutes. SC2 has agreed to settle the case with the US regulator without admitting to or denying the allegation, the SEC release noted.
SC2 Promoted Unregistered Crypto Assets
The indictment noted that Stoner Cats highlighted the benefits of having its web-focused NFTs, including the asset having a higher resale value in the secondary market. According to the SEC, SC2 prided itself on being a reputable Holywood producer and a knowledgeable crypto firm, attracting investors to its collections.
“Here, the SEC’s order finds that Stoner Cats marketed its knowledge of crypto projects, touted that the price of their NFTs could increase, and took other steps that led investors to believe they would profit from selling the NFTs in the secondary market. It’s therefore hardly surprising, as the order finds, that Stoner Cats sold its entire supply of NFTs in just 35 minutes, generating proceeds of over $8 million, most of which were then resold-not held as collectibles-in the secondary market within months,” the Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, stated.
As also contained in the indictment, the web3 animated series creators configured the Stoner Cat NFTs to provide a 2.5% royalty when holders resell them in the retail market. The SEC noted that SC2’s actions violated the Securities Act of 1933, as they were unregistered offerings not exempt from registration.
Stoner Cats Agrees to Settle SEC
The SEC noted that it has agreed to a cease-and-desist settlement with Stoner Cat, with the web3 animated series creators accepting a fine of $1 million. SC2 also agreed to refund injured investors’ funds and destroy all its NFT collections.
The SEC’s stance on unregistered crypto assets remains firm, as the regulator has clamped down on that department lately. Crypto giants like Binance and Coinbase have come under the sword, and the Wall Street top regulator is not looking to slow down soon.
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