The US Securities and Exchange Commission (SEC) has charged Impact Theory, an LA-based media and entertainment company, with offering unregistered securities through its ‘Founder’s Keys’ NFT project.
Impact Theory, which produces a podcast hosted by entrepreneur Tom Bilyeu, raised up to $30 million from hundreds of US and non-US investors in 2021 through the tiered NFT offering.
According to the SEC, Impact Theory encouraged potential investors to buy a Founder’s Key as an investment into the business, stating that investors would profit from their purchases if Impact Theory was successful in its efforts.
“The order finds that the NFTs offered and sold to investors were investment contracts and therefore securities,” read the SEC press release. “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.”
“Absent a valid exemption, offerings of securities, in whatever form, must be registered,” said Antonia Apps, director of the SEC’s New York Regional Office. “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.”
Impact Theory consented to a cease-and-desist order after being found in violation of the Securities Act of 1933's registration provisions.
The company is mandated to pay over $6.1 million, which includes disgorgement, prejudgment interest, and a civil fine.
Additionally, a Fair Fund will be set up to reimburse affected investors who bought the NFTs.
Impact Theory has also committed to destroying all Founder’s Keys in the group’s possession, as well as waiving any future royalties from secondary market sales of the Founder’s Keys.
Proactive has asked Impact Theory for a comment.