The regulator charged media company Impact Theory with “conducting an unregistered offering of crypto asset securities”. The firm must now pay $6.1 million.
The US Securities and Exchange Commission (SEC) has charged Impact Theory, a popular podcast studio and YouTube channel co-founded by Tom and Lisa Bilyeu, with selling unregistered “crypto asset securities” in the form of NFTs. It’s the first enforcement action of its kind involving NFTs.
The August 28 release outlines that Impact Theory raised $30 million from hundreds of investors through the offering from October to December 2021. The company encouraged investors to view their NFT purchases as an “investment into the business”, adding they would profit from their purchase if the project was successful.
The SEC opined that the NFTs offered and sold to investors by Impact Theory were investment contracts and therefore securities.
In the US, the Howey test is used to determine whether or not an asset is a security. The test looks at four core aspects: the investment of money, whether there’s a common enterprise, the expectation of profits, and the efforts of others.
If an asset meets the Howey test, it must register with the SEC as a security, and will be subject to securities law.
“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 agreed to a cease-and-desist order ordering it to pay $6.1 million in disgorgement, prejudgment interest, and a civil penalty. The order also establishes a ‘Fair Fund’ to return funds to injured investors.
The company must also destroy all Founder’s Keys (NFTs) in its possession or control, publish notice of the order on its websites and social media channels, and eliminate any royalties the project may receive from future secondary market transactions involving the NFTs.
At the time of writing, Impact Theory has a total trading volume of 3,265 ETH on OpenSea, approximately $5,380,491. Content produced by the company tends to focus on health and self-improvement.
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