The U.S. Securities and Exchange Commission (SEC) has unveiled a proposed plan to distribute funds collected from Stoner Cats 2 LLC following enforcement actions for securities violations. In a court filing on Wednesday, the agency detailed that the company conducted an unregistered sale of non-fungible tokens (NFTs), deeming them crypto asset securities under federal law.
Background and Celebrity Endorsement
Stoner Cats is an animated web series backed by actress Mila Kunis, with voice talents including Kunis, Ashton Kutcher, and Chris Rock. In 2021, the company sold 10,320 NFTs to the public at $800 each, raising $8.2 million. The SEC found that the offering violated Sections 5(a) and 5(c) of the Securities Act of 1933, as the NFTs were marketed with promises of potential profits from secondary sales.
SEC Ruling and Penalties
Without admitting or denying the findings, Stoner Cats 2 LLC agreed to a cease-and-desist order, a $1 million civil penalty, and the destruction of all NFTs in its possession. The SEC established a Fair Fund to compensate investors harmed by the unregistered offering. The regulator noted that the company's marketing campaign emphasized profit expectations, leading investors to treat the NFTs as securities.
Compensation Details
Eligible investors are those who purchased or acquired NFTs from the offering on July 27, 2017 (the original sale date) and held or sold them on or before September 12, 2023. Claimants must submit validated documentation, and only claims exceeding $20 will be paid. Wallets involved in transactions will be screened for compliance with U.S. sanctions. Any undistributed funds will revert to the U.S. Treasury. The fund administrator will handle claims processing, distribution, and compliance, maintaining transparency through reports and public notices.
The SEC stated: "The Net Available Fair Fund is comprised of the $1,000,000 in civil money penalties collected from the respondent, plus any interest and income earned thereon, less taxes, fees, and expenses. The proposed plan provides for the distribution of the net available fair fund to compensate investors who were harmed by the respondent’s violations in connection with the unregistered sale of crypto assets offered and sold as securities called Stoner Cats NFTs."
Public comments on the proposed plan are invited within 30 days. The full plan and distribution methodology are available on the SEC's website, with comments accepted electronically or in writing. All submissions will be made publicly accessible.