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SEC Charges Stoner Cats for Unregistered NFT Securities, Fines $1 Million

SEC Charges Stoner Cats for Unregistered NFT Securities, Fines $1 Million

In a significant development, the Securities and Exchange Commission (SEC) has levied charges against Stoner Cats 2 LLC, the company behind the Stoner Cats web series that features Hollywood luminaries Mila Kunis and Ashton Kutcher. The SEC alleges that Stoner Cats 2 LLC conducted an unlawful sale of royalty-generating non-fungible tokens (NFTs), classifying them as unregistered securities.

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Unlawful Sale of NFTs

The SEC’s order centers on the sale of 10,000 NFTs linked to characters from the Stoner Cats animated web series. In June 2021, this NFT collection garnered at least $8 million in sales revenue. The agency contends that Stoner Cats 2 LLC marketed these digital art collectibles as lucrative investments, emphasizing the potential for owners to profit by reselling their NFTs on the secondary market.

Marketing Strategies Under Scrutiny

Stoner Cats 2 LLC’s marketing campaign strategically highlighted the team’s background as Hollywood producers, their involvement in cryptocurrency ventures, and the prominent actors set to appear in the web series. These tactics created an impression among investors that owning Stoner Cats NFTs would lead to financial gains, primarily through the anticipated increase in their value on the secondary market.

Motivation for NFT Trading

The SEC asserts that Stoner Cats NFT holders were incentivized to actively trade these collectibles. Each secondary market transaction involving these NFTs would yield a 2.5% royalty. This enticing feature resulted in purchasers engaging in over 10,000 transactions, collectively spending more than $20 million.

Resolution and Compliance

While Stoner Cats 2 LLC has neither admitted nor denied the SEC’s findings, it has agreed to a cease-and-desist order and a civil penalty of $1 million. Additionally, the company has committed to destroying all NFTs within its control. Stoner Cats 2 LLC will make the directive accessible on its website and social media platforms.

A Fair Fund for Injured Investors

In response to the SEC’s order, a Fair Fund will be established to reimburse investors who suffered losses from purchasing Stoner Cats NFTs. This legal action by the SEC underscores the need for compliance and transparency in the burgeoning NFT market.

The charges against Stoner Cats serve as a reminder of the regulatory scrutiny surrounding digital assets and the obligation to adhere to securities laws when engaging in NFT-related activities.


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