The Securities and Exchange Commission charges Stoner Cats 2 LLC, claiming that the Stoner Cats web series starring Mila Kunis and Ashton Kutcher has used royalty-generating non-fungible tokens (NFTs) for finance, which are unregistered securities, and that their sale was unlawful.
The SEC’s order alleges that the company behind the animated show, Stoner Cats 2, sold 10,000 NFTs identifying characters from its eponymous animated web show concept and took away at least $8 million from it in July 2021.
Before and after the collection’s initial sale, SC2’s marketing campaign highlighted specific advantages of owning the digital art collectibles, like the opportunity for owners to resell their NFTs on the secondary market, which can be profitable for investors.
The order also found that the SC2 team’s marketing efforts highlighted their experience as Hollywood producers, their familiarity with cryptocurrency projects, and the well-known actors who would be appearing in the web series. This gave investors reason to believe they would profit because a popular web series would increase the value of Stoner Cats NFTs on the secondary market.
As per the SEC, Stoner Cats NFT holders were motivated to trade the NFTs on the secondary market with a 2.5% royalty for each transaction, leading purchasers to spend more than $20 million in at least 10,000 transactions.
SC2 has not admitted or denied the SEC’s finding; perhaps it agreed to a cease-and-desist order and to pay a civil penalty of $1 million. SC2 consented to destroy all NFTs in its custody or control and to make a notice of the directive available on its website and social media accounts. The order creates a Fair Fund to reimburse money lost by injured investors who bought NFTs.