The SEC is reportedly investigating Bored Ape NFT creator for securities law violations
The US Securities and Exchange Commission is reportedly investigating Yuga Labs Inc., the creator of leading non-fungible tokens such as Bored Ape Yacht Club, whether the company’s sale of digital assets violates securities laws.
Bloomberg, citing a person familiar with the matter, claims the SEC is investigating whether certain NFTs from Yuga Labs are securities and should follow the same disclosure laws. The investigation is said to extend not only to Yuga Lab’s NFTs, but also to the company’s distribution of ApeCoin, which is given to Bored Ape Yacht Club holders.
The report notes that Yuga has yet to be charged with any wrongdoing, and that an SEC investigation does not necessarily mean the agency will pursue action. But where there’s smoke, there’s fire. The SEC typically does not initiate an investigation unless it believes there may be potential wrongdoing.
In response, Yuga is downplaying the investigation, with a spokesperson bizarrely telling Bloomberg that the investigation is because policymakers and regulators want to learn more about “the new world of Web3.”
“We hope to work with the rest of the industry and regulators to define and shape the emerging ecosystem,” the spokesperson said. “As a leader in the space, Yuga is committed to fully cooperating with all inquiries along the way.”
While Yuga Labs may be right that NFTs and related Web3 products are new and somewhat novel, the SEC has not been shy about pursuing cryptocurrency and blockchain companies in the past. If they find that Yuga has not followed the securities laws, they can come down hard on the company.
The NFT market, which was briefly the next big thing but has since seen trading volumes crash by 97%, is somewhat reminiscent of the early days of bitcoin and other cryptocurrencies. The market is arguably in its wild west phase with various questionable players, some larger, more established players and the rise of support companies like Tokenproof working to stop Web3 fraud.
The amount of money involved in NFTs has also seen the sector targeted by hackers, notably with the theft of Ethereum and NFTs from Yuga’s Discord server in June and a hack of the BAYC Instagram account in April. The latter resulted in the theft of around $3 million in NFTs.
