Topic: SEC vs NFTs (Read 310 times)

The SEC investigated NBA Top Shot developer Dapper Labs, but decided to close case in September
https://fortune.com/crypto/2024/04/11/sec-dapper-labs-investigation-case-closed-september-2023-roham-gharegozlou/
"Following the collapse of crypto exchange FTX, the SEC has steadily sued and investigated a suite of crypto companies, including TRON Foundation, Terraform Labs, Binance, Coinbase, Kraken, and now Uniswap. And settlements with Impact Theory and Stoner Cats in the second half of 2023 imply that the regulator has begun to seriously scrutinize the NFT industry.

The agency’s decision to close its investigation into Dapper Labs, one of the most funded companies in the market, may indicate a course correction. “It will surely provide some kind of comfort to participants in the NFT market,” Philip Moustakis, a securities lawyer at Seward & Kissel, told Fortune.

He added, though, that “you can’t presume that all NFTs are safe. The SEC has already made the point that some transactions in NFTs could constitute securities transactions.”

Arthur Jakoby, a former SEC prosecutor who now specializes in securities litigation at Herrick Feinstein LLP, cautioned against reading too much into the agency’s closure of its investigation. “It doesn’t mean they’re not going to investigate them next year,” he said. “It doesn’t mean that they think Dapper Labs hasn’t done something wrong. It doesn’t mean that they cleared Dapper Labs.” "

Press Release
https://www.sec.gov/news/press-release/2023-178
SEC Charges Creator of Stoner Cats Web Series for Unregistered Offering of NFTs

News update.

Stoner Cats NFT's team agreed to pay a fine. I speculate that this might not be the last NFT project that will be cracked down by the SEC. Does this imply that the free mint collections similar to Cryptopunks are safer investments? They might be hehehe.



The creator of the popular Stoner Cats animated web series will pay a $1 million civil fine to settle U.S. Securities and Exchange Commission charges it conducted an unregistered offering of crypto asset securities by selling non-fungible tokens, the regulator said on Wednesday.

Stoner Cats 2 LLC did not admit or deny wrongdoing in settling charges it illegally raised $8.2 million in July 2021 by selling 10,320 NFTs for about $800 each, which sold out in 35 minutes.

Source https://www.reuters.com/legal/sec-fines-stoner-cats-creator-offering-nfts-2023-09-13/

It appears you cannot make memes about cats and the market when uncle Gary is reading what you post on social media hehehe.

The SEC sent a cease and desist to a NFT project for creating a meme and sharing it on social media. I do not know where uncle Gary misunderstood this. This is clearly a joke. This might be a freedom of speech case similar Larry Flynt and Hustler magazine where they printed a cartoon of a pastor having sex with his own mother.



a) @StonerCatsTV tweeted on September 7, 2021 a meme suggesting that the smartest thing to do during a dip in the crypto markets would be to “Buy more ETH & sweep the Stoner Cats floor.”

Source https://www.sec.gov/files/litigation/admin/2023/33-11233.pdf

I think that in this process SEC has a great chance of winning the case in court and therefore the company will conclude a pre-trial agreement and pay a fine. I didn’t delve deeply into the essence of the matter, but it seems that the company sold NFTs instead of tokens on ICO.
And if the project is serious, then 6 million won't be a big deal for them.

@avikz. It is very arguable if NFTs offer zero value or not because for collectors, they offer cultural value and what the market appears to show us, they also offer financial value. The cryptospace might be redefining the idea of value very much similar to how money has value. It is an abstraction similar to how Pokemon cards have value for their collectors who are willing to buy, sell and trade them.

In any case, similar to what was mentioned, another judge might do the SEC's job for them and uncle Gary might lose another case.

If SEC is going after the NFT companies, they have my support! NFTs offer zero value and congests the network which pushes the transaction fees higher. Also NFT is a new way to launder money and syphon out funds. SEC has every right to protect their people.

Unlike cryptocurrency, NFT is basically a hype which only makes the owner rich. It's on the verge of dying.

As a person who wants to live a simple life, he has no choice but to comply with the legislation, as most of us cannot hide our wealth, which often appears in the form of an apartment, house, shop, or money in the bank, and it differs from the capabilities of whales, who can legally pay much less taxes than you.
It does not mean accepting all legislation, but trying to comply with it at a minimum and reduce identity verification.
The article mentioned that this NFT was sold in 2021, as that year witnessed a lot of chaos and exaggerated investment in NFTs, but I think that many are less prepared now.

This is an old philosophy. Russian hackers even say that bankers are the worst criminals in the world, and they are not even tormented by their conscience for stealing from bankers. It is even considered fair. Like Robin Hood, who took from the rich and gave to the poor.

However, securities frauds and scams also happen in traditional finance. The only difference is the scammers  in traditional finance are our rulers, the people who are fixing the game against you. They do not want the clowns like Arthur Hayes, CZ and Justin Sun to run the scams. They want to monopolize the scams and have all control and power over it.

Fraudsters will find a way to deceive an illiterate person, so the only way to lose money from the actions of scammers is to constantly improve your literacy and work with proven services.
It is better to make a deal and not get extra 2% than to lose the entire deposit.And a fool always loses a coin.

Yes, there is no clear regulations and that's why projects are taking advantage of it, be it they are going to scam or not. So at the end of the day, it boils down as to how and what will be the regulations and when it will be promulgated by the SEC or any governing body for that matter.

So for now, as I have said, it's free for all, but when crypto regulations are point into place by different countries, this scammers will have no way to steal money from crypto investors again.

Any official response can be used by crypto project lawyers against the SEC, so they don't say anything intelligible. Previously, the SEC was famous for having the best lawyers in the world and all companies were afraid to sue them, but now, if there are no other options, then big business will seek their rights in court, so I fully agree with you. Judicial practice will become law before laws are passed.

@zasad@. I predict that this will be another case where the SEC will try to stretch the securities laws but when the companies requests for guidance to avoid breaking the law, the SEC refuses to give it to them.

The SEC then will make an indictment, they will face a judge and this judge will do uncle Gary's job again for him and declare that these tokens are not by themselves securities.

I believe that is the key problem. No regulation certainty allows many things to happen, either abuse from the government or just scams running around with little to no incentive to stop them. Things like this should not last that long. I don't know why it takes so long for regulations to come out either, considering other countries already propose many bills to be approved. On the other hand, people need to improve their awareness so they don't have to rely on the law to avoid easy-to-spot scams like NFT airdrop, etc. CMIIW.

Yeah, but the thing though, crypto market is fairly young an we really don't know what's their regulation about the market itself. And we have seen them making contractions as well, so I will say that we are in the gray area as far as crypto or for SEC for that matter.

But if there are clear cut laws, then for sure NFT or projects are going to carry it out within the boundaries so that they won't violate any laws established. But for now, it seems that we are in the western type of era. SEC can swing at anyone they want, and then projects, some of them might be pulling out scams after scams.

I don't blame the SEC. The regulator usually works with the major violator to ensure that all minor violators of the law read the practice and try to comply with the regulator's requirements. The regulator should not kill projects, but regulate markets and indicate the rules to players. There are thousands of projects in this market that have violated US laws, but the SEC apparently has its own vision.

It also brings negative PR to the crypto community as a whole. I've seen way too many people register NFT = scam = crypto, although I don't think relying on regulation is the best choice. At the end of the day, people's awareness is key to solving this issue, sadly most people just fall for them easily. As long as the SEC doesn't blindly define every token as NFT or every NFT needs their control, I also think what they are doing with this is okay. Not sure how long my opinion will stay the same though, since the SEC is unpreditable nowadays.

Businesses should ensure they abide by the laws or regulations before engaging in any form of business activity. Carrying out an unregistered business in not acceptable and SEC should not be blamed for going after them. I don't see it as a witch-hunt but the SEC is carrying out its regulative function. These NFT tokens need strong regulations because it has become a free market for scams.

It turns out that the NFT token also comes in Utility and Security. But most NFT tokens are scams. There is no need to worry that all NFT tokens will be banned. Most of these projects will not survive this regulation because they do not have enough resources for the courts. And in principle, this is good for the crypto market, because after the precedent, similar projects will be closed.
Unlike coins, the price of NFT tokens is very easy to manipulate and reduce or increase tax profits.