SEC Charges Stoner Cats Creators

SEC Charges Stoner Cats Creators
In this post

The SEC is charging Stoner Cats 2 LLC with conducting an unregistered crypto asset securities offering through NFTs. 

The Deets

  • Over 10,000 NFTs sold at $800 each in just 35 minutes in 2021
  • Marketing alleged to emphasize potential for resale value and team expertise
  • Violated the Securities Act of 1933 by selling unregistered public offerings
  • Stoner Cats agreed to cease and desist and to pay $1 million civil fine, plus set up Fair Fund 

The Bulk

Stoner Cats 2 LLC, also known as SC2, has been charged from the Securities and Exchange Commission (SEC) for conducting an unregistered offering of crypto asset securities in the form of NFTs. The venture aimed to raise funding for an animated web series called "Stoner Cats."

SC2 managed to sell more than 10,000 NFTs at approximately $800 apiece, selling out within 35 minutes. According to the SEC, the SC2 marketing campaign overtly highlighted the potential for resale value on the secondary market and emphasized the team's experience in Hollywood production - which included Mila Kunis and Ashton Kutcher. 

In addition, it's noted that the company encouraged individuals to buy and sell these NFTs, driving more than $20 million in at least 10,000 transactions. By doing so, they violated the Securities Act of 1933, as they were not registered or exempt from registration.

❗️Why It Matters

This is now the second major 2021 NFT project to be charged by the SEC for an unregistered offering securities via NFTs. Might it be a matter of time before more dominos fall? 

📊 By the Numbers

Stoner Cats 2 LLC raised approximately $8 million from their NFT sale and encouraged secondary transactions that exceeded $20 million.

🎤 Founder Feedback

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 securityGurbir S. Grewal, Director of the SEC's Division of Enforcement

🎬 Take Action

If you own a Stoner Cats NFT, keep an eye out for announcements regarding the Fair Fund established to return monies to injured investors.

🧠 Learn More 

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