Recently, the U.S. Securities and Exchange Commission (SEC) has accused Impact Theory, a Los Angeles-based media and entertainment company, of offering unregistered securities.
Specifically, according to the indictment, Impact Theory conducted the sale and issuance of unregistered NFT “Founder’s Keys” from October to December 2021, raising around $30 million from numerous investors.
Of particular concern, Impact Theory also promised to generate profits for investors while planning to build a next-generation Disney. This is a major point of contention and the primary reason why the SEC is cracking down on token issuance projects, alleging that they are securities.
In response to the SEC’s allegations, although not admitting or denying wrongdoing, Impact Theory agreed to a cease-and-desist order and concluded violations of the registration provisions of the Securities Act of 1933. They are required to pay a total of over $6.1 million in disgorgement, pre-judgment interest, and civil penalties.
Furthermore, Impact Theory must establish a fund to reimburse investors who purchased the NFT “Founder’s Keys.” Moreover, the company has agreed to destroy all NFT “Founder’s Keys” that they own.
Significantly, as a gesture of transparency, Impact Theory commits to disseminate the SEC’s order on their digital platforms and not to receive any copyright fees from subsequent secondary market transactions related to the mentioned NFTs.
The case of Impact Theory serves as a wake-up call for NFT projects in the market. It also provides a profound reminder to cryptocurrency companies that compliance with regulations is crucial in an industry where the legal landscape is still relatively nascent.