The US Securities and Exchange Commission (SEC) is investigating Yuga Labs, the brains behind the popular Bored Ape Yacht Club NFT collection, for alleged unregistered offerings.
The United States Securities and Exchange Commission (SEC) is investigating Yuga Labs, Inc., the parent company of the blue-chip NFT collection Bored Ape Yacht Club (BAYC). According to a report, SEC wants to know whether some of Yuga’s NFTs and its native token, the ApeCoin, are similar to stocks and should follow similar disclosure regulations.
Before all this, Yuga Labs had never been accused of any wrongdoing. So, opening the agency’s probe doesn’t necessarily mean that the agency will sue the company.
“It’s well-known that policymakers and regulators have sought to learn more about the novel world of Web3. We hope to partner with the rest of the industry and regulators to define and shape the burgeoning ecosystem,” Yuga said in a statement. “As a leader in the space, Yuga is committed to fully cooperating with any inquiries along the way.”
SEC Hot on the Heels of the Crypto Market
The BAYC investigation is SEC Chair Gary Gensler’s latest attempt to “make” the overall cryptocurrency market adhere to the agency’s regulations. Gensler has been hot on the heels of the crypto market and has repeatedly said that the agency should regulate most crypto assets since, based on a 1940s Supreme Court decision, they have characteristics of securities.
The said ruling authorized the agency to tag investments as securities when managing such assets brings in profit. Recently, the regulator has presented several enforcement cases against digital asset firms for failing to register their offerings.
It even imposed a $50 million penalty in February against BlockFi, Inc. In September, the agency claimed jurisdiction over all ETH transactions because most ETH validators are concentrated in the US.
BAYC on SEC’s Radar
Founded in 2021, Yuga Labs has become one of the most prominent Web3 brands. Its flagship NFT collection, BAYC, has become a sought-after status symbol among NFT enthusiasts, including celebrities, entertainers, entrepreneurs, and athletes.
Pieces from the 10,000 BAYC NFT collection often trade for hundreds of thousands of dollars, and at this time of writing, its floor price (lowest price for one NFT) is $96,375.41. Its native token, the ApeCoin, created in March 2022, serves as the BAYC ecosystem’s primary cryptocurrency.
The BAYC NFT collection and ApeCoin are on the SEC’s radar. The latter is closely investigating whether Yuga Labs’ issuance of NFTs and the native token’s launch violated any rules. The agency alleges that ApeCoin is equivalent to security.
It remains to be seen whether the investigation may or may not result in charges, but Yuga has not been accused of any wrongdoing so far. At any rate, the probe may have affected ApeCoin’s price, as it fell about 9% to $4.76 as of 1:45 PM in New York, per data from CoinMarketCap.
SEC Puts Target on NFTs’ Back
The agency has determined to put a target on the NFT market’s back since March to establish whether NFTs breached federal securities laws. The agency is keen on investigating the inflated NFT market, which peaked in 2021 mainly due to celebrity endorsements and record sales. Because of the hype, NFT trading volumes shot up beyond $13 billion, a 42,988% increase from 2020.
The regulator is also probing fractional NFTs that involve breaking down assets into units that can easily be sold and bought.
Considering how far the SEC has expanded its investigation into crypto, it’s unlikely it will stop its investigations anytime soon.
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