NFT Creators, Marketplaces Under SEC Investigation Over Securities Violations

Joseph Henry, Tech Times 03 March 2022, 04:03 am

The US Securities and Exchange Commission (SEC) is currently conducting a special probe on non-fungible token (NFT) marketplaces and creators following their involvement in illicit crypto-token offerings, according to the reports.

The investigation, which was spearheaded by Chairman Gary Gensler, is investigating the activities of the involved. According to the anonymous sources, some assets were used to "raise" money just like how traditional securities work.

SEC Moves to Investigate NFT Sector

NFT Creators, Marketplaces Under SEC Investigation Over Securities Violations

(Photo : Andrey Metelev from Unsplash)
According to the sources, SEC is reportedly probing some NFT marketplaces and creators over their involvement in illegal token offerings.

Bloomberg initially reported that over the past few months, the SEC attorneys have been informed about the matter. According to the report, subpoenas were delivered which pertain to the details about the potential token offerings.

Amid the hype which surrounds NFTs, the other side of the coin tackles how authorities scrutinized them for the previous year. SEC is probing to dig deeper on the usage of "fractional" NFTs. This involves selling tokenized NFTs and distributing it to a smaller market.

It could be remembered that SEC commissioner Hester Pierce, better known as "Crypto Mom" stated this issue in March 2021. She warned that the NFT issuers could be trespassing the law whenever they sell the "fractional" interest of NFTs.

As regulators impose sanctions to regulate the cryptocurrencies, SEC continues to launch numerous probes to stop illegal transactions and activities in the market. To add, SEC recently slapped BlockFi with a $100 million fine for its failure to exclude lending products (high yield) on the list of the securities.

So far, we know that despite some people being skeptical about Bitcoin and Ethereum, they tend to steer away from several accusations because the SEC does not consider them as securities, for now.

However, some cryptos did not receive the same treatment as two of the largest digital currencies in the world. Apparently, XRP's parent firm Ripple Labs has been called out for its violation of selling "unregistered securities" since 2020, Cointelegraph wrote in its latest report.

$1 Million OpenSea Lawsuit

A few weeks ago, the most popular NFT marketplace OpenSea was reported to have been facing a million-dollar lawsuit, according to Tech Times.

The tension arose when an NFT collector said that his rare Bored Ape collection was stolen because of the platform's weak security management.

In addition, the plaintiff claimed that the hacker only released .01 ETH or about $26 for the said "rare" NFT. Later, he discovered that the culprit was able to sell it at a bigger price of 99 ETH or $250,000.

Regarding the lawsuit, the complainant asked OpenSea to pay for the damage that it caused to the tune of $1 million. Aside from that, he also wanted the NFT marketplace to return his expensive digital collection.

In other news, Crypto gaming company Animoca severed ties with its Russian customers following the continuous tension between Russia and Ukraine.

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Written by Joseph Henry