Producers for the animated series Stoner Cats have been charged by the SEC with the illegal sale of $8 million worth of NFTs. SC2, the company behind the series, which features a voice cast that includes Ashton Kutcher, Mila Kunis, Chris Rock, Dax Shepard, Gary Vaynerchuk, Jane Fonda, Michael Bublé, Seth MacFarlane, and Vitalik Buterin, used the sale of the NFTs to raise money to finance the series in July 2021 with the NFTs priced at $800 each.
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According to the SEC (via Variety), “Without admitting or denying the SEC’s findings, SC2 agreed to a cease-and-desist order and to pay a civil penalty of $1 million.” The order from the SEC also establishes a fund that will return money that “injured investors paid to purchase the NFTs” while SC2 also agreed to destroy “all NFTs in its possession or control and publish notice of the order on its website and social media channels.”
In July 2021, SC2 sold more than 10,000 NFTs at around $800 each to fund Stoner Cats with the NFTs selling out in 25 minutes. Per the report, six episodes of the series was produced and were accessible only to those who held the NFTs. According to the SEC, the campaign for the NFTs “highlighted specific benefits of owning them” which included an option to resell the NFTs on the secondary market and also that the marketing played up the expertise of its Hollywood producers, the actors involved, and knowledge of crypto “leading investors to expect profits because a successful web series could cause the resale value of the Stoner Cats NFTs in the secondary market to rise.” According to the SEC, SC2 set the NFTs to provide a 2.5 percent royalty to the company for each secondary market transaction which led purchasers to spend more than $20 million in at least 10,000 transactions and that SC2 violated the Securities Act of 1933 by offering and selling the asset securities in an unregistered offering.
“Registration of securities, including crypto asset securities, protects investors by providing them with disclosures so they can make informed investing decisions,” Carolyn Welshhans, Associate Director of the SEC’s Home Office, said in a statement. “Stoner Cats wanted all the benefits of offering and selling a security to the public but ignored the legal responsibilities that come with doing so.”
What is Stoner Cats About?
Here’s how the official Stoner Cats website describes the series: “In the before-times (aka pre-pandemic), three seasoned creators, Ash Brannon, Chris Cartagena, and Sarah Cole developed a little show called Stoner Cats. Based on Sarah’s personal experience with her mother, Stoner Cats is a story of a woman who uses medical marijuana to alleviate her early Alzheimer’s symptoms and her beautiful family of cats who will do literally anything to save her.
Once Mila Kunis and her Orchard Farm Productions partners heard this story, they knew that a hilarious and intimate story like this needed to have deep direct engagement with its audience. So, they formed a formidable collective of voice talent, animators, and creatives of all kinds to come together with technology and NFT experts (including the brilliant minds behind CryptoKitties) to bring this story to life using NFTs.”
