The United States Securities and Exchange Commission (SEC) has charged the creators of the project Stoner Cats with selling unregistered securities around the launch of NFTs in 2021.
Stoner Cats 2 LLC, the company behind the NFT-based cartoon project, agreed to a cease-and-desist order and will pay a $1 million civil penalty without admitting fault. The company will also destroy any NFTs that it still holds, and establish a "Fair Fund" to refund investors who purchased the NFTs in the primary sale.
Stoner Cats was created by Orchard Farm Productions, the production studio of actress Mila Kunis, who also voiced one of the feline characters in the cartoon series.
What Is Stoner Cats, the NFT Series Starring Mila Kunis, Ashton Kutcher and... Vitalik?
There are all sorts of ways to watch TV these days. Cable, satellite, streaming service, YouTube. Hell, you can still get a fuzzy version of PBS if you twist a coat hanger into rabbit ears and stick it on your set. To that list we can add one more: NFTs, the blockchain-based tokens that act as a deed of ownership for other assets. Instead of paying for a subscription to Netflix, you can buy non-fungible tokens of toked-up felines, then use them to watch a short cartoon about said cats starring M...
According to the SEC, the company raised $8 million in the sale, as users purchased Ethereum NFTs as entrance tickets to show. The NFTs let them watch a web series in which five cats—and their owner—get high.
The show also featured the voices of big-name celebrities like Kunis' husband Ashton Kutcher, actress Jane Fonda, "Family Guy" creator Seth McFarlane, and comedian Chris Rock. Playing the role of a taxidermied feline, Ethereum creator Vitalik Buterin also made his Hollywood debut.
These A-list celebrities were not named in today’s press release, although the SEC alleges that their brands were leveraged as part of the NFT marketing campaign.
According to the agency, the NFTs sold out in just 35 minutes and the company had "highlighted specific benefits of owning them," including the ability to resell them on secondary markets—which would earn the company a royalty fee.
Did the SEC Just Declare War on NFTs?
On Monday, the United States Securities and Exchange Commission (SEC) announced its first-ever enforcement action over the sale of NFTs, fining a Los Angeles-based media company $6 million for selling illegally unregistered securities. But does the action signal an impending crackdown against a broader array of NFT projects? The facts of the case weren’t exactly ambiguous: The fined company, Impact Theory, told potential NFT buyers that “if you’re paying 1.5 [ETH], you’re going to get some massi...
“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 security,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
Wednesday's move is the latest against celebrities and notable influencers who offered NFTs for sale. In August, Impact Theory—a media company run by entrepreneur Tom Bilyeu—had to pay $6 million in a settlement over its Founder’s Key collection, which also had to be destroyed as part of the agreement.
Editor's note: This story was updated after publication with additional details.
