One of the most obvious warning signs that an investment may not be legitimate is the promise of high rates of return on the investment. According to Todd R. Tresidder, a Financial Mentor blogger and millionaire through investments, “above market returns are the number one characteristics of investment fraud and the bait designed to hook investors.”1
Investors with Impact Theory were lured to invest in the company with inflated promises according to the U.S. Securities and Exchange Commission (SEC). On August 28 the SEC issued the Los Angeles based media and entertainment company a cease and desist order for unregistered offerings of crypto asset securities in the form of purported non-fungible tokens (NFTs).
In their filing the SEC also cited a number of instances where the company had touted projected high rates of return on investments. The company raised $30 million from hundreds of investors in the U.S.2
In the administrative filing the SEC alleges that Impact Theory violated the Securities Act by offering and selling non-fungible tokens (NFTs) without obtaining the required registration or qualifying for an exemption from registration. NFTs are a newer type of cryptocurrency which “transform digital works of art and other collectibles into one-of-a-kind verifiable assets that are easy to trade on the blockchain.”3 Impact sold three tiers of NFTs which they called Founder’s Keys and named as “Legendary,” “Heroic,” and “Relentless.”
They sold these keys as investments in Impact’s business earmarked for development, to hire more employees, and to create more projects. Through events and public statements, Impact Theory touted that potential investors were investing in Impact Theory and would profit if Impact Theory was successful in its efforts “trying to build the next Disney.”4 The SEC alleges that these “KeyNFTs were offered and sold as investment contracts, and therefore securities.”5
The company purported that investors would get “tremendous value” from their NFT purchases and in the future those investments would be significantly greater than their purchase price. The Founders Keys were offered and sold to investors from October to December 2021.
In the SEC Cease and Desist order the Commission states that prospective and actual purchasers, based on Impact’s marketing campaign, made statements including, “this is like being offered to invest in a booming company when they’re Series A,” and “It’s like investing 10K with a 300K upside, for a small risk,” and “Buying a founders key is like investing in Disney, Call of Duty, and YouTube all at once,”6
Antonia Apps, Director of the SEC’s New York Regional Office stated, “Without registration, investors of all types are deprived of the protections afforded them by the robust disclosures and other safeguards long provided by our securities laws.”7 Impact agreed to the Cease and Desist Order without admitting or denying the SEC’s findings.
Our Securities Law Firm serving the greater Detroit area has the experience and knowledge required to help investors regain their unjust financial losses. If you have questions or concerns about securities fraud, your investments, or your broker’s management of your account, speak to one of our securities lawyers today, Free.
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1 Six Warning Signs an Investment is Too Good to Be True, by Hillary Hoffower, 10/16/2018
Link: https://www.businessinsider.com/investment-advice-warning-signs-of-investment-fraud-2018-10#:
2,7 Press Release: SEC Charges LA-Based Media and Entertainment Co. Impact Theory for Unregistered Offering of NFTs, 8/28/2023
Link: https://www.sec.gov/news/press-release/2023-163
3 What is an NFT? Non-fungible tokens explained by Jazmin Goodwin, 11/10/2021
Link: https://www.cnn.com/2021/03/17/business/what-is-nft-meaning-fe-series/index.html
4,5,6 SEC Order: Administrative Proceeding File No. 3-21585, 8/28/2023
Link: https://www.sec.gov/files/litigation/admin/2023/33-11226.pdf