SEC Takes Action Against Mila Kunis-Backed Web Series for Unauthorized NFT Offerings
The production company associated with Stoner Cats enticed investors by urging them to buy and trade NFTs tied to the profitability of its Hollywood-backed web series, as revealed by the SEC.
According to a directive issued on Wednesday, the SEC asserted that the non-fungible tokens linked to the Stoner Cats web series, featuring acclaimed actors Mila Kunis and Ashton Kutcher, were illicitly presented. Additionally, it was emphasized that these NFTs, responsible for generating royalties to fund the series, were not registered as securities.
The directive contends that Stoner Cats 2 (SC2), the organization behind the animated show, amassed a minimum of $8 million in revenue from the sale of 100,000 Stoner Cat NFTs embodying characters from its animated web series concept in July 2021. The company's extensive promotional efforts for these digital art collectibles, both before and after the initial sale, "linked the show's success to the NFTs' value," thereby heightening investors' anticipations of profiting from them, as stated in the SEC's filing.
"The SC2 conducted a comprehensive media campaign to promote the Stoner Cats NFTs both before and after the offering, when the NFTs were traded in the secondary market," announced the SEC in the directive. "[It] undertook these activities without officially registering the Stoner Cats NFT offering."
As part of the settlement, the company, without admitting or denying any wrongdoing, consented to a $1 million penalty and pledged to eradicate all remaining NFTs in its possession, as outlined in the directive. Furthermore, they agreed to establish a fund to reimburse individuals who had invested in the tokens.
Stoner Cats, an animated web series featuring anthropomorphized cats gaining a form of "sentience" through exposure to cannabis smoke, is detailed on the series' website. The show premiered six episodes between July 2021 and December 2022, featuring the vocal talents of Hollywood figures such as Kunis, Seth McFarland, Chris Rock, Jane Fonda, Dax Shepard, and Kutcher, along with Ethereum founder Vitalik Buterin taking on the role of Lord Catsington.
The directive specified that the company ensured all individuals involved in the project, including actors, artists, producers, and various professionals, received a share of the offering proceeds and royalties generated from secondary market sales of the Stoner Cats NFTs.
According to the SEC, holders of Stoner Cats NFTs were incentivized to engage in trades, earning a 2.5% royalty for each secondary-market transaction involving the collectibles. This led to over 10,000 secondary transactions, accumulating a total value exceeding $20 million, according to regulatory authorities. Additionally, at least 20% of these transactions occurred prior to the initial episode of the Stoner Cats web series being broadcasted, as indicated in the directive.
This incident is part of a broader trend where regulatory bodies are closely scrutinizing alleged securities offerings from NFT creators. Just last month, the SEC took legal action against NFT producer Impact Theory for similar reasons.