SEC Imposes 20% Penalty on Impact Theory NFT Project, Accusing it of Misappropriating $6.1M in Funds
The Los Angeles-based media and entertainment company Impact Theory has been fined by the United States Securities and Exchange Commission (SEC) for conducting an unregistered sale of non-fungible tokens (NFTs). The SEC alleged that Impact Theory launched a collection of NFTs called Founder’s Keys between October and December 2021, raising approximately $30 million from the sale. The collection featured NFTs grouped into three tiers – Legendary, Heroic, and Relentless. Users from various locations, including the U.S., participated in the sale. Impact Theory attracted investors by promising significant value to its NFT holders, aiming to build the next Disney. However, the company failed to register the NFT collection as investment contracts and securities, violating the SEC’s securities laws. As a result, Impact Theory agreed to a cease-and-desist order and a fine of $6.1 million, which represents about 20% of the amount raised. Additionally, the company agreed to destroy all Founder’s Keys NFTs in its possession. The SEC has a history of taking action against crypto-based projects, as seen in its recent lawsuit against cryptocurrency investment adviser Titan for using misleading performance metrics in advertisements to attract investors. The SEC has also been involved in a legal battle with Ripple, a crypto-based payment company, over allegations of offering an unregistered security called XRP. While Ripple achieved a partial win, the SEC has appealed the ruling in court.
