The Securities and Exchange Commission (SEC) has charged Stoner Cats 2 LLC (SC2) with conducting an unregistered offering of crypto assets. SC2 produced an animated web series called “Stoner Cats” through the sale of non-funigble tokens (NFTs). The NFTs were priced at $800 each and in July 2021, sales were approximately $8 million for SC2.
The cast for “Stoner Cats” included some big names in Hollywood like Ashton Kutcher and Mila Kunis. Chris Rock, Dax Shepard, Gary Vaynerchuck, Jane Fonda, Michael Bublé, Seth MacFarlane and Vitalik Buterin also stared. The show was about a woman who uses medical marijuana to alleviate her early Alzheimer’s symptoms and her family of cats. The web series was developed by Ash Brannon, Chris Cartagena, and Sarah Cole. Kunis also served on the production team for this web series.
The series was based off of Cole’s own personal experience with her mother. Per the Stoner Cats website, “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 CrytoKitties) to bring this story to life using NFTs.”
According to the SEC, “Without admitting or denying the SEC’s findings, SC2 has agreed to a cease-and-desist order and to pay a civil penalty of $1 million.” Per the order, SC2 is to return any money that “injured investors paid to purchase the NFTs.” SC2 is also to “destroy all NFTs in its possession of control and publish notice of the order on its website.”
The SEC found on July 27th, 2021, SC2 offered and sold more than 10,000 NFTs for $800 each, selling out in 35 minutes. The Stoner Cats website says six episodes of “Stoner Cats” were produced, accessible only to those holding NFT digital collectibles. The SEC alleges that SC2’s marketing campaign for the NFTs “highlighted specific benefits of owning them” and the option to resell on the secondary market.
The SEC’s order finds that, SC2 configured their NFTs to provide the company a 2.5% royalty for each secondary market transaction. This led to purchasers to spend more than $20 million in at least 10,000 transactions. The SC2 allegedly violated the Securities Act of 1993, by offering and selling these NFTs to the public on an unregistered offering, not exempt from registering.