Stoner Cats pay $1 million after SEC enforcement action


Table of Content

The SEC has taken action against Stoner Cats for selling securities in the form of NFTs, which raised around $8 million from investors.

Profit expected by NFT purchasers

According to a press release published on the Securities and Exchange Commission site, Stoner Cats was charged with selling 10,000 NFTs to investors at a price of $800 each, the offering for which was reportedly sold out in 35 minutes.

The SEC charged that Stoner Cats launched a marketing campaign that underscored the benefits of owning the NFTs and that the company also highlighted the option of owners being able to sell their NFTs on the secondary market.

The SEC went on to state that the Stoner Cats team marketed themselves as “Hollywood producers” and that the combination of their crypto knowledge and ability to hire “well-known actors” would lead investors to expect a profit from their NFTs.

In addition, by encouraging investors to sell their NFTs on in the secondary market, the team benefited from a 2.5% royalty on each sale. It was reported by the SEC that at least 10,000 transactions of the NFTs caused investors to spend an accumulative total of more than $20 million.

An investment contract

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said of the unregistered offering:

“Regardless of whether your offering involves beavers, chinchillas or animal-based NFTs, under the federal securities laws, it’s the economic reality of the offering – not the labels you put on it or the underlying objects – that guides the determination of what’s an investment contract and therefore a security,” 

He added:

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.”

Stoner Cats will pay a $1 million penalty

Stoner Cats agreed to a “cease and desist order” without admitting or denying any wrongdoing. The civil penalty that the team will pay will be put towards a “Fair Fund” that will seek to return money to investors who paid for the NFTs.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

#Stoner #Cats #pay #million #SEC #enforcement #action

About Author

Leave a Reply