Crypto Assets Tied to Webcast Show Are Securities
Crypto assets such as bitcoin are purchased and sold each day. The assets are frequently in the form of a coin and may be attached to a blockchain. Over the last few years the number of different types of crypto assets has proliferated. Many have special rights and are part of a larger investment. Some are not. Depending on the characteristics, some crypto assets may be securities. Others are not. Most are controversial. Those involved in the action below were tied to a web series called the Stoner Cats. The coins linked to the series were securities, according to the SEC. In the Matter of Stoner Cats 2, LLC., Adm. Proc. File No. 321655 (September 13, 2023).
Respondent managed and produced the Stoner Cats web series. It also offered and sold the Stoner Cats NFTs to the public. Beginning in late July 2021 Respondent conduced an offering of non-fungible tokens called Stoner Cats crypto assets. The coins sold for about $800 each. The offering sold out in 35 minutes. It generated about $8.2 million.
The purpose of the Stoner Cats NFT offering was to fund the production of an animated web series called Stoner Cats. Investors were told that Respondent would develop the Stoner Cats web series using their money. SC2 promised investors that they would have exclusive access to the web series and an online community as well as future content.
Each Stoner Cats NFT was associated with a unique still image of one of the characters in the web series. Purchasers could not select the character. To the contrary, purchasers had no control over which character was reflected. About 62% of the purchasers bought more than one coin. About 20% resold the coin.
Respondent offered and sold the Stoner Cats NFTs as “investment contracts and therefore securities, pursuant to . . . ” the Court’s decision in SEC v. W.J. Howey Co., 328 U.S. 293, 298-99 (1946). The Commission has also issued a Section 21(a) report ,known as the DAO report ,regarding the application of Howey to crypto assets. Under Howey and the DAO report Respondent was required to registered the assets as securities. The failure to register, coupled with the sales, constituted a violation of Securities Act Section 5(a) and 5(c).
To resolve the proceedings Respondent consented to the entry of a cease-and-desist order based on the Sections cited above. Respondent will also pay a penalty of $1 million which will be distributed through a fair fund.
Crypto Assets Tied to Webcast Show Are Securities
Crypto assets such as bitcoin are purchased and sold each day. The assets are frequently in the form of a coin and may be attached to a blockchain. Over the last few years the number of different types of crypto assets has proliferated. Many have special rights and are part of a larger investment. Some are not. Depending on the characteristics, some crypto assets may be securities. Others are not. Most are controversial. Those involved in the action below were tied to a web series called the Stoner Cats. The coins linked to the series were securities, according to the SEC. In the Matter of Stoner Cats 2, LLC., Adm. Proc. File No. 321655 (September 13, 2023).
Respondent managed and produced the Stoner Cats web series. It also offered and sold the Stoner Cats NFTs to the public. Beginning in late July 2021 Respondent conduced an offering of non-fungible tokens called Stoner Cats crypto assets. The coins sold for about $800 each. The offering sold out in 35 minutes. It generated about $8.2 million.
The purpose of the Stoner Cats NFT offering was to fund the production of an animated web series called Stoner Cats. Investors were told that Respondent would develop the Stoner Cats web series using their money. SC2 promised investors that they would have exclusive access to the web series and an online community as well as future content.
Each Stoner Cats NFT was associated with a unique still image of one of the characters in the web series. Purchasers could not select the character. To the contrary, purchasers had no control over which character was reflected. About 62% of the purchasers bought more than one coin. About 20% resold the coin.
Respondent offered and sold the Stoner Cats NFTs as “investment contracts and therefore securities, pursuant to . . . ” the Court’s decision in SEC v. W.J. Howey Co., 328 U.S. 293, 298-99 (1946). The Commission has also issued a Section 21(a) report ,known as the DAO report ,regarding the application of Howey to crypto assets. Under Howey and the DAO report Respondent was required to registered the assets as securities. The failure to register, coupled with the sales, constituted a violation of Securities Act Section 5(a) and 5(c).
To resolve the proceedings Respondent consented to the entry of a cease-and-desist order based on the Sections cited above. Respondent will also pay a penalty of $1 million which will be distributed through a fair fund.