Mila Kunis’ ‘Stoner Cats’ NFT firm charged by SEC.

Mila Kunis' 'Stoner Cats' NFT firm charged by SEC.

NFT Company Backed by Mila Kunis Faces SEC Charges

Just when you thought the world of NFTs couldn’t get any more intriguing, the U.S. Securities and Exchange Commission (SEC) has yet another NFT company in its crosshairs. But this time, there’s a twist: the company in question is backed by none other than actress Mila Kunis and her production company, Orchard Farm Productions.

The company in question is Stoner Cats, which was marketed as an NFT project aimed at funding an animated series featuring an elderly woman and her cannabis-smoking cats. Kunis took the lead on the project, forming Stoner Cats 2 LLC (SC2) with other crypto enthusiasts and Hollywood producers. In fact, Kunis herself appeared on Conan O’Brien’s TBS talk show to discuss the upcoming NFT launch, generating significant buzz.

In July 2021, Stoner Cats released its NFTs for sale, and all 10,000 of them sold out in no time, raising over $8 million. Shortly after, the animated show debuted, featuring the voices of Kunis, Ashton Kutcher, Chris Rock, and other big names in the entertainment industry. Even crypto figures like Gary Vaynerchuk and Ethereum founder Vitalik Buterin lent their voices to characters in the show.

However, despite the initial success, the SEC alleges that Stoner Cats marketed its NFTs as investments, encouraging NFT owners to sell them on the aftermarket for a profit. The SEC also pointed to the high volume of aftermarket sales, totaling more than $20 million in over 10,000 transactions, as evidence that the NFTs were being sold as crypto asset securities, rather than mere collectibles.

The SEC claims that Stoner Cats violated the Securities Act of 1933 by offering and selling these crypto asset securities to the public without proper registration. In response, SC2 has agreed to a cease-and-desist order and will pay a civil penalty of $1 million. This penalty will be used to establish a “Fair Fund” to compensate investors who suffered losses due to the sale. Additionally, as part of the settlement, the company must destroy all Stoner Cats NFTs in its possession.

SEC’s Division of Enforcement director Gurbir S. Grewal highlighted the fact that it is the economic reality of an offering, not the labels or underlying objects, that determines whether it qualifies as an investment contract and therefore as a security. This statement reflects the SEC’s stance on the regulation of NFTs and reinforces the need for proper compliance.

While the case against Stoner Cats may raise eyebrows, it also highlights the growing influence of NFTs in the entertainment industry. With celebrities and Hollywood producers venturing into the NFT market, it’s clear that these digital assets have gained mainstream attention. However, as the SEC’s actions against Stoner Cats demonstrate, regulatory guidelines must be followed to protect investors and prevent potential fraud.

As the NFT space continues to evolve and mature, it’s important for companies and individuals involved to educate themselves on the legal and regulatory implications. This incident serves as a reminder that even star power and well-known names cannot exempt NFT projects from compliance with securities laws.

In the end, this case showcases the intersection of technology, media, and finance. It serves as a cautionary tale about the importance of transparency, due diligence, and clear communication in the world of NFTs. As the industry continues to navigate uncharted territory, it is crucial to strike a balance between innovation and investor protection.