The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against a Los Angeles-based media and entertainment company for illegally selling cryptocurrencies that the agency considers securities.
The regulator accused Impact Theory of violating the registration provisions of the Securities Act of 1933, offering and selling non-fungible tokens (NFTs) without registration or exemption, according to a press release released by the SEC on Monday. .
The SEC claims that Impact Theory has raised approximately $30 million from hundreds of investors, some in the US, through the sale of three types of NFTs called Founder's Keys between October and December 2021. NFTs were expected to provide access to exclusive content and benefits from Impact Theory, which it claims is “trying to build the next Disney.”
The SEC alleges that Impact Theory is marketing NFTs as an investment opportunity, promising that investors will profit from their purchases if the company is successful. The SEC argues that NFTs meet investment contract criteria and are therefore securities under the Howey test, a legal framework used to determine whether an asset is a security.
The SEC's order states that Impact Theory has agreed to adjudicate the charges and pay more than $6.1 million in damages, interest and penalties without accepting or denying the findings.
*Not investment advice.