BREAKING: Yuga Labs Facing SEC Investigation
Yuga Labs is being investigated by the U.S. Securities and Exchange Commission about the sales of its NFTs possibly violating federal law, according to a news brief from the Bloomberg Terminal.
The report was shared by fellow Bloomberg Crypto Senior Editor Anna Irrera in a tweet Tuesday. The news has not been confirmed by Lucky Trader.
The SEC said it does not comment on "the existence or nonexistence of possible investigations," but Yuga Labs released the following statement in response to the report:
“It’s well-known that policymakers and regulators have sought to learn more about the novel world of web3. We hope to partner with the rest of the industry and regulators to define and shape the burgeoning ecosystem. As a leader in the space, Yuga is committed to fully cooperating with any inquiries along the way," said a spokesperson for the company.
Yuga Labs was known to be working with powerhouse Silicon Valley law firm Fenwick & West for legal counsel and had possible contact with former SEC director William Hinman, who is an advisory partner for Andreessen Horowitz, a key Yuga Labs investor.
The mood in the Bored Ape Yacht Club Discord wasn't as serious as the news of a possible SEC investigation circulated. Members mostly shared a popular copypasta.
Yuga Labs made headlines when it launched ApeCoin back in March as a claim for holders of its Bored Ape Yacht Club, Mutant Ape Yacht Club, and Bored Ape Kennel Club NFTs. Later, the coin (about 305 $APE) was required to purchase Otherdeed NFTs for the Yuga Labs' metaverse game called The Otherside. The 55,000-edition Otherdeeds collection sold out in about two-and-a-half hours, gaining more than $300 million for the company.
The crypto world has long speculated on how the SEC will treat NFTs and other similar digital assets. In July, Coinbase petitioned the SEC to set rules regarding NFTs.
The SEC's long-held standard for measuring if an asset is a security is the Howey Test, which comes from a 1946 case where Howey Co. sold pieces of his orange grove's land to investors to raise funds for the grove's development. In that case, the Supreme Court ruled that the deal constituted an "investment contract" and Howey Co. was in violation of the Securities Act of 1933.
Yuga Labs' Otherdeed sale offered users a chance to be a part of Otherside: a "world-building platform that provides an exciting environment to play, create, compete, connect, and explore together. Initially, users will experience Otherside through a narrative gameplay experience (aka The Voyager’s Journey) co-developed by Yuga Labs and Improbable and based on the technology from M².
"In the future, we look forward to seeing what new experiences and games our community can create to expand the possibilities of the metaverse," Yuga Labs said on its Otherside website.
In June, a bill proposed by U.S. Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) treated digital assets as commodities, not securities. That bill is currently in committee.
The story is developing. Stay tuned to Lucky Trader for more information.