SEC settles first NFT case while Binance considers Russia exit

29 Aug 2023

Tom Bilyeu, co-founder and host of Impact Theory. Image: Cjcaprio/Wikimedia Commons (CC BY-SA 4.0)

Impact Theory, the company behind Tom Bilyeu’s podcast, allegedly offered customers NFTs as an investment, promising to ‘build the next Disney’.

In the first instance of enforcement action related to non-fungible tokens (NFTs) in the US, a Los Angeles-based media company has been charged for allegedly offering unregistered NFTs.

The US Securities and Exchange Commission (SEC) has sued Impact Theory, a company that has a podcast hosted by YouTube personality and entrepreneur Tom Bilyeu, for allegedly offering securities in the form of NFTs that helped it raise more than $30m through sales in late 2021.

According to the SEC order, Impact Theory sold NFTs across three tiers – called Founder’s Keys – and encouraged potential investors to view a purchase as an investment into the business.

Impact Theory also allegedly told investors that they would profit from their purchases if the company was successful in its efforts, which includes an attempt to “build the next Disney”.

NFTs offered by Impact Theory were found to be “investment contracts and therefore securities”. The SEC said the company violated federal securities laws by selling crypto asset securities to the public in an unregistered offering that was “not otherwise exempt” from registration.

“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.”

Now, Impact Theory has agreed to pay more than $6m to settle the enforcement action and destroy all Founder’s Keys NFTs in its possession.

The SEC has been cracking down on the crypto sector heavily. In June, it hit Binance, the world’s largest crypto exchange, with 13 charges for alleged securities law violations.

Meanwhile, the popular crypto exchange is contemplating pulling out its business from Russia. “All options are on the table, including a full exit,” a spokesperson told The Wall Street Journal.

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Tom Bilyeu. Image: Cjcaprio/Wikimedia Commons (CC BY-SA 4.0)

Vish Gain is a journalist with Silicon Republic