The Securities and Exchange Commission (SEC) has accused Los Angeles-based media and entertainment company Impact Theory of conducting an unregistered offering of crypto asset securities, specifically non-fungible tokens (NFTs). The company, headquartered in Los Angeles, managed to raise around $30 million through the offering, the SEC said in a press release.

"Absent a valid exemption, offerings of securities, in whatever form, must be registered," Antonia Apps, director of the SEC’s New York Regional Office, is quoted as saying in the press release. “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.” 

The SEC said that between October and December 2021, Impact Theory sold three levels of NFTs it called Founder's Keys, labeled as "Legendary," "Heroic," and "Relentless." Impact Theory positioned the purchase of these Founder's Keys as investments in the company, saying buyers would benefit financially if the company achieved its goals, the SEC press release said.

The SEC concluded that the NFTs sold by Impact Theory were essentially investment contracts, thus classifying them as securities, and said Impact Theory violated federal securities laws by publicly offering and selling them without proper registration or exemption.

Without admitting or denying the SEC's findings, Impact Theory agreed to a cease-and-desist order that acknowledges violation of the Securities Act of 1933 registration provisions and agreed to pay over $6.1 million, consisting of disgorgement, prejudgment interest, and a civil penalty. Also, a Fair Fund will be established to refund money paid by affected investors who purchased the NFTs, the SEC release said.

Benjamin Mishkin, Jessica Quinn, and Judith Weinstock from the SEC's New York Regional Office conducted the investigation, aided by personnel from the Division of Examinations, the Enforcement Division's Crypto Assets and Cyber Unit (CACU), and the Division of Economic and Risk Analysis, supervised by Sheldon Pollock, David Hirsch and Jorge Tenreiro, the SEC release said.