SEC: Impact Theory Sold $30 Million in Unregistered NFTs

A media company that claimed it wanted to “build the next Disney” is now facing charges from America’s crypto regulator.

The Securities and Exchange Commission announced Monday (Aug. 28) that the Los Angeles-based Impact Theory conducted an unregistered offering of crypto asset securities in the form of purported non-fungible tokens (NFTs), raising $30 million in the process.

The charges come at the tail end of a summer that have seen the SEC increase its focus on unregistered securities in the crypto space.

“Absent a valid exemption, offerings of securities, in whatever form, must be registered,” Antonia Apps, director of the SEC’s New York Regional Office, said in a news release.

“Without registration, investors of all types are deprived of the protections afforded them by the robust disclosures and other safeguards long provided by our securities laws.”

According to the SEC, Impact Theory in the fall of 2021 offered and sold three tiers of NFTs, dubbed “Founder’s Keys,” telling potential investors to consider the purchase of a Founder’s Key an investment into the business.

Among other things, Impact Theory stressed that it was “trying to build the next Disney,” and, if successful, it would provide “tremendous value” to Founder’s Key buyers. 

“The order finds that the NFTs offered and sold to investors were investment contracts and therefore securities,” the release said. “Accordingly, Impact Theory violated the federal securities laws by offering and selling these crypto asset securities to the public in an unregistered offering that was not otherwise exempt from registration.”

The SEC said Impact Theory did not admit or deny its findings, but agreed to an order requiring it to “pay a combined total of more than $6.1 million in disgorgement, prejudgment interest, and a civil penalty.”

On Twitter/X Monday, Impact Theory Co-Founder Tom Bilyeu said the company was happy to have reached a settlement with the government.

“Although we are disappointed that the SEC has chosen to broadly question the exciting technical innovations that make digital assets possible through the lens of the securities laws, we remain optimistic for the future of this industry in the United States, and hope we remain the global home of innovation,” he wrote.

Bilyeu’s optimism may be shared by fewer and fewer people, as recent weeks have seen a number of companies pull back from the crypto space in the wake of SEC actions, including those involving the industry’s two largest players.

The SEC in June filed 13 charges against Binance, and its founder, Changpeng Zhao, claiming the platform “engaged in an extensive web of deception.”

The following day, the SEC sued publicly listed crypto exchange Coinbase, a Binance peer, claiming that the platform had allowed users to trade unregistered securities. Both companies have said they will fight the SEC’s charges.