Don’t get high off your own supply.
The Securities and Exchange Commission has slapped the company behind the animated series “Stoner Cats” with a $1 million fine for selling millions of dollars in NFTs to help finance the show’s creation.
The nine-episode show about a group of cats who become fully sentient after getting into their owners’s marijuana supply, was launched in 2021 after its creators raised $8.2 million through the sale of non-fungible tokens to investors, the SEC said.
Investigators say, however, that the company behind the offering, Stoner Cats 2 LLC, never registered the sale with regulators, which violated the law around the sale of securities.
“Regardless of whether your offering involves beavers, chinchillas or animal-based NFTs, under the federal securities laws, it’s the economic reality of the offering – not the labels you put on it or the underlying objects – that guides the determination of what’s an investment contract and therefore a security,” said the SEC’s head of enforcement, Gurbir Grewal.
The series came into being after actress Mila Kunis’ production company, Orchard Farm Productions, agreed to back the project and its NFT offering, according to the Stoner Cats’s website.
As part of a settlement with the SEC, the company that created the show, Stoner Cats 2, agreed to pay a $1 million fine, return money to any investors and destroy any NFTs it still had in its possession.
The company didn’t admit to any wrongdoing. Kunis was not named in court filings as a participant in the case.
Messages sent to representatives of the company and for Kunis weren’t immediately returned.
When the NFTs — which featured images of the cat characters from the show — were issued for sale on July 27, 2021, all 10,000 sold out within 35 minutes, the SEC said. The money was then used to produce the series.
The show featured characters voiced by well-known actors like Kunis, her husband Ashton Kutcher, Chris Rock and Jane Fonda. Initially, the episodes were only available to holders of the NFTs, but were eventually made available to the public.
As part of the sale, the company retained certain resale rights to the NFTs so that it would collect 2.5% of any secondary sale, the SEC said. That money was used to pay the actors and other creative talent who participated.
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