The creator of animated series Stoner Cats, which featured actors Mila Kunis and Ashton Kutcher, agreed to pay $1 million to settle US Securities and Exchange Commission charges that it offered NFTs that were really unregistered securities.
(Bloomberg) — The creator of animated series Stoner Cats, which featured actors Mila Kunis and Ashton Kutcher, agreed to pay $1 million to settle US Securities and Exchange Commission charges that it offered NFTs that were really unregistered securities.
Stoner Cats 2 LLC was charged with illegally raising about $8 million from investors to finance the web-based series through the sale of more than 10,000 nonfungible tokens at about $800 each in the span of 35 minutes on July 27, 2021, the SEC said in a statement Wednesday. The entity didn’t admit or deny any wrongdoing as part of the settlement.
The order found that both before and after the NFTs were sold, Stoner Cats 2’s marketing highlighted specific benefits of ownership, including the option to resell them in the secondary market, the agency said. The settlement was the second action in about two weeks by the SEC against an NFT issuer for offering unregistered securities.
“Stoner Cats wanted all the benefits of offering and selling a security to the public but ignored the legal responsibilities that come with doing so,” Carolyn Welshhans, associate director of the SEC’s Home Office, said in a statement.
Skadden, Arps, Slate, Meagher & Flom LLP, which represented Stoner Cats 2, declined to comment.
In order to watch Stoner Cats, which also featured actor Chris Rock, and Ethereum co-founder Vitalik Buterin, viewers had to purchase the show’s original NFT artwork. The series, broken up into 5-minute episodes, revolves around five house cats who become sentient after accidentally inhaling medical marijuana.
NFTs are a form of cryptocurrency that allow holders to prove their ownership through digital items and rely on blockchain technology similar to what powers Bitcoin. At the time of Stoner Cats’ inception, NFTs were seeing frenzied demand, with daily sales reaching an all-time high in August 2021. A flurry of other celebrities, including actresses Gwyneth Paltrow and Reese Witherspoon, were also pitching cryptocurrencies and NFTs to the public at the time.
On Aug. 28, the SEC alleged that Impact Theory LLC raised approximately $30 million from hundreds of investors through its NFT offerings. The SEC said the offerings should have been registered with the agency, and that Impact Theory had agreed to pay more than $6 million to settle the allegations.
(Adds that the firm’s legal representative declined to comment. An earlier update remove an inaccurate reference to alleged marketing practices in the third paragraph.)
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