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SEC charges Flyfish Club for unregistered NFT offering

SEC charges Flyfish Club for unregistered NFT offering

GrafaGrafa2024/09/18 03:55
By:Isaac Francis

The U.S. Securities and Exchange Commission (SEC) has charged Flyfish Club LLC for conducting an unregistered offering of crypto asset securities via non-fungible tokens (NFTs), raising $14.8 million to fund an exclusive members-only restaurant.

This action by the SEC highlights the increasing regulatory scrutiny of NFTs being used as investment vehicles.

According to the SEC, Flyfish Club offered and sold around 1,600 Flyfish NFTs to investors, which were required for membership access to the club.

The SEC stated that Flyfish marketed these NFTs not just as digital collectibles but also as potential investments, leading investors to believe they could profit from the company’s efforts.

"Flyfish engaged in significant marketing efforts that promoted the NFTs as investments and led investors to expect profits from Flyfish’s efforts," the SEC noted.

The SEC further pointed out that Flyfish suggested potential profits could be made from reselling the NFTs or leasing them as a "passive income strategy."

The order revealed that 42% of investors bought more than one NFT, even though only one was needed for club access, indicating that many investors saw the NFTs as an investment opportunity rather than just a membership pass.

Flyfish Club was found to have violated Sections 5(a) and 5(c) of the Securities Act of 1933, which prohibit the sale of securities without proper registration or an applicable exemption.

"The offering was not registered or exempt from registration," the SEC stated, emphasising Flyfish's failure to comply with legal requirements for selling securities.

Without admitting or denying the SEC's findings, Flyfish Club has agreed to a cease-and-desist order and will pay a $750,000 civil penalty.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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