SEC charges company behind Stoner Cats NFT series with unregistered securities sale
The animated series, accessible only to NFT holders, had a cast that included Vitalik Buterin, Gary Vaynerchuk and Hollywood A-listers.
Stoner Cats 2 LLC (SC2), the company behind the Stoner Cats animated series, has agreed to a cease-and-desist order and other measures imposed by the United States Securities and Exchange Commission (SEC) after being charged with conducting an unregistered offering of crypto asset securities in the form of nonfungible tokens (NFTs).
According to the SEC, SC2 sold more than 10,000 NFTs for about $800 a piece. The sale took 35 minutes and occurred on July 27, 2021. Proceeds were used to fund the series. The NFTs allowed purchasers to view the Stoner Cats animated series, which revolved around an elderly woman and her cats consuming cannabis. The first episode of six premiered two days after the NFT sale.
The Stoner Cats project was spearheaded by actress Mila Kunis, who teamed up with established NFT creators. The series’ cast consisted of Ashton Kutcher, Chris Rock, Dax Shepard, Gary Vaynerchuk, Jane Fonda, Michael Buble, Mila Kunis, Seth MacFarlane and Vitalik Buterin.
Related: SEC chair issues warning to celebrities promoting crypto amid latest enforcement action
The SEC said in a statement that SC2 marketing the potential secondary market for the NFTs and implied that the qualifications of the creators and prominence of the actors would cause the NFTs to rise in value. The NFTs were configured so that SC2 received a 2.5% royalty on every secondary sale. There were at least secondary 10,000 sales of the NFTs worth more than $20 million, the SEC said.
SEC settled its first enforcement action involving PFP NFTs. SEC alleges each uniquely generated “Stoner Cat” itself to be a “crypto asset security in the form of a non-fungible token.” Mechanics of the offering were similar to most popular PFP projects. Some of my takeaways… /1
— Mike Selig (@MikeSeligEsq) September 13, 2023
Besides agreeing to the cease-and-desist order, SC2 will pay a civil penalty of $1 million. A Fair Fund will be created for disgorgement to reimburse “injured investors.” SC2 will destroy all NFTs in its possession or control. The company did not admit to or deny the charges.
The SEC first brought charges of unregistered securities sales charges against an NFT issuer in August in its case against Impact Theory.
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