Washington, Aug 29 (IANS): The US Securities and Exchange Commission (SEC) has charged Impact Theory, a media and entertainment company headquartered in Los Angeles, with conducting an unregistered offering of crypto asset securities in the form of purported non-fungible tokens (NFTs).

This is the first time the authority has taken enforcement action against a company for selling unregistered NFTs.

Impact Theory raised approximately $30 million from hundreds of investors, including investors across the US through the offering.

“Absent a valid exemption, offerings of securities, in whatever form, must be registered. 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,” said Antonia Apps, Director of the SEC’s New York Regional Office.

Without admitting or denying the SEC’s findings, Impact Theory agreed to a cease-and-desist order finding that it violated registration provisions of the Securities Act of 1933 and ordering it to pay a combined total of more than $6.1 million in disgorgement, prejudgment interest, and a civil penalty.

The order also establishes a Fair Fund to return monies that injured investors paid to purchase the NFTs, the SEC said in a statement late on Monday.

Impact Theory offered and sold three tiers of NFTs, known as Founder’s Keys, which Impact Theory called “Legendary”, “Heroic”, and “Relentless”.

Impact Theory encouraged potential investors to view the purchase of 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.

Among other things, Impact Theory emphasised that it was “trying to build the next Disney”, and, if successful, it would deliver “tremendous value” to Founder’s Key purchasers.

The SEC order found that the NFTs offered and sold to investors were investment contracts and therefore securities.

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.

“Impact Theory agreed to destroy all Founder’s Keys in its possession or control, publish notice of the order on its websites and social media channels, and eliminate any royalty that Impact Theory might otherwise receive from future secondary market transactions involving the Founder’s Keys,” the statement read.