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"What happened to Mila Kunis' Stoner Cats? Unregistered NFT SEC controversy explained"

The SEC fined Mila Kunis and Ashton Kutcher's NFT-based web series, Stoner Cats, $1 million for unregistered securities.

On September 13, the Securities and Exchange Commission (SEC) took action against Mila Kunis and Ashton Kutcher's NFT-based web series, Stoner Cats, for violating securities regulations. This adds to the mounting pressure the couple has been facing recently. Just a few weeks ago, they faced criticism for supporting actor Danny Masterson, who was charged with rape.

The SEC has imposed a $1 million fine on the stoner cat NFTs and ordered the company to destroy all NFTs in its possession. In a statement, the SEC revealed that Stoner Cats 2 LLC (SC2) was charged with conducting an unregistered offering of crypto asset securities in the form of non-fungible tokens (NFTs). The NFTs generated approximately $8 million from investors to finance the Stoner Cats animated series.

According to the SEC, SC2 sold over 10,000 NFTs for around $800 each, with the entire stock selling out in just 35 minutes. The issue arose from SC2's marketing campaign, which emphasized the benefits of owning the NFTs and the ability for investors to sell them on the secondary market. This marketing strategy, coupled with the involvement of famous actors and SC2's claim of crypto knowledge and Hollywood expertise, potentially increased the resale value of the stoner cat NFTs.

The SEC found that SC2 configured the NFTs to provide a 2.5 percent royalty for each secondary market transaction and actively encouraged buying and selling of the NFTs. As a result, purchasers spent over $20 million in approximately 10,000 transactions. The SEC determined that SC2 violated the Securities Act of 1933 by offering and selling these crypto asset securities in an unregistered offering.

Gurbir S. Grewal, the SEC Division of Enforcement Director, emphasized that it is the economic reality of an offering that determines whether it is an investment contract and therefore a security, rather than the labels or underlying objects. In this case, the NFT's marketing strategy created the perception that its price could increase, leading investors to believe they could profit from selling them on the secondary market. The SEC's order states that it was not surprising that the NFTs sold out quickly and generated over $8 million, most of which was then resold on the secondary market.

Carolyn Welshhans, the SEC Home Office Associate Director, highlighted that the registration of securities is crucial for protecting investors and ensuring they have the necessary information to make informed investment decisions. Stoner Cats sought the benefits of offering and selling a security to the public but neglected the legal responsibilities that come with it.

While SC2 did not admit or deny the SEC's findings, they agreed to pay a civil penalty of $1 million and comply with a cease-and-desist order. Additionally, a Fair Fund will be established to return the funds paid by injured investors to purchase the NFTs. SC2 will also destroy all NFTs in its possession and publish a notice of the order on its website and social media platforms.

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