The restaurant in New York, FlyFish Club, has agreed to pay a fine of $750,000 to settle with the SEC and its accusations regarding the sale of NFT. For the Securities and Exchange Commission of the USA, the NFTs were sold following an unregistered offering of crypto-securities.
New York: the restaurant FlyFish Club and the 750,000$ fine from the SEC for the sale of its NFTs
Last Monday, the Securities and Exchange Commission of the USA had accused the New York restaurant, FlyFish Club, of conducting an unregistered offering of crypto-securities in the form of NFTs.
In practice, it seems that through the sale of FlyFish NFT, the company raised about 14.8 million dollars from investors, to finance the construction and launch of a private restaurant for members.
Specifically, the sale of the 1600 FlyFish NFT was carried out between August 2021 and May 2022.
The ordinance highlighted that during this period, the Club promoted NFTs as investments and led investors to expect profits in return. In practice, for the SEC, FlyFish told investors that they could potentially make a profit if the club succeeded.
On one hand, the owners of the FlyFish NFT could have then resold them on the secondary market at higher prices, on the other hand, rented them to others interested in accessing the club as a “passive income strategy”.
With this marketing move, the SEC emphasizes that 42% of investors purchased more than one NFT in the offering, even though only one NFT was needed to become a member of the club.
New York: the SEC and the fine to the restaurant for selling its FlyFish NFT
After the accusation, without admitting or denying the SEC’s findings, FlyFish agreed to cease operations and pay the fine of $750,000.
Not only that, the restaurant company has also agreed to destroy all Flyfish NFTs it has under its control in the next 10 days and to not accept future royalties from NFT sales.
But the issue of the SEC and NFTs does not seem to end here. Last August, the one to be notified of being under investigation by the SEC was the NFT marketplace of OpenSea.
Even if not explicitly stated, it seems that the issue also appears to be related here to the possible accusations of offering unregistered security to the public.
NFTs become “unregistered security” only if they are sold with the promise of making profits for those who buy them, derived solely from the activity of those who sell them.
In any case, the co-founder and CEO of OpenSea, Devin Finzer, said he was shocked by the accusations made by the SEC against creators and artists. Not only that, just as it happens with crypto companies, also for NFTs, Finzer says he is ready to react and fight.
The artists sue the SEC
While the SEC fires accusations in the NFT sector, as it has always done in the crypto sector, last July two artists sued it.
In practice, Brian Frye e Jonathan Mann have accused the SEC for the confusion that exists regarding NFTs. In fact, the two artists have asked for clarifications on the laws about securities and Non-Fungible Tokens.
Specifically, their lawyers asked if crypto artists are required to “register” their NFT art before selling it to the public. Another question then concerns the publication of information on the risks of purchasing their art.
Not only, the lawyers then made a comparison between the sale of NFT Art on the secondary market and Taylor Swift concert tickets, which are often sold on the secondary market.
In this sense, just like Taylor Swift sells tickets on the secondary market and releases statements to promote her events, the two artists should also be free to do the same with their NFT.