On August 28, 2023 the SEC filed an administrative action against Impact Theory, LLC. According to the Order Instituting Cease and Desist Proceedings, Impact Theory has agreed to settle.
Impact Theory sold NFTs as securities from October 13, 2021 to December 6, 2021, and as a result, raised almost $30 million worth of ETH. Because Impact Theory sold these securities without registration, it violated sections 5(a) and 5(c) of the Securities Act. Statements quoted in the order show that purchasers of the NFTs were motivated by earning a return based on Impact Theory’s efforts.
In mitigation, the SEC notes that Impact Theory repurchased its NFTs on the secondary market, resulting in approximately $7.7 million being returned to investors. Impact Theory has further agreed to destroy all of the NFTs that it has in its possession, publish notice of the Order on its websites and social media channels, revise its smart contracts to eliminate any ongoing royalty payments from secondary market transactions, certify its compliance in writing, and assist the SEC with a distribution plan.
In addition to the remedial undertakings, Impact Theory will pay disgorgement of approximately $5.1 million, prejudgment interest of approximately $483,000, and a civil monetary penalty of $500,000.
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