What happened to Mila Kunis' Stoner Cats? Unregistered NFT SEC controversy explained

On Wednesday, September 13, the SEC clamped down on Mila Kunis and Ashton Kutcher's NFT-based web series, Stoner Cats, for being unregistered securities. Mila Kunis and Ashton Kutcher are under a lot of pressure lately. Earlier this month, the couple came under fire for the letters they wrote to the judge in support of fellow That 70s show actor Danny Masterson, who was charged with two counts of r*pe.

Now, the SEC has charged the stoner cat NFTs with a $1 million fine. The company was also ordered to destroy all the NFTs in its possession. The SEC released a statement revealing that Stoner Cats 2 LLC (SC2) was charged with:

"Conducting an unregistered offering of crypto asset securities in the form of purported non-fungible tokens (NFTs)."

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All NFTs in possession of Stoner Cats 2 LLC are to be destroyed

According to the SEC's statement, the NFTs generated around 8 million dollars from investors to fund the Stoner Cats animated series.

"SC2 offered and sold to investors more than 10,000 NFTs for approximately $800 each, selling out in 35 minutes," the statement read.

The root of the problem lay in Stoner Cats 2 LLC’s marketing campaign, which highlighted certain benefits of owning them before and after they were sold, including the option for investors to sell the NFTs on the secondary market.

Per the statement, the marketing team's emphasis on their crypto knowledge, "expertise" as producers in Hollywood, and the involvement of famous actors in the series could have caused a rise in the secondary market resale value of the stoner cat NFTs.

"SC2 configured the Stoner Cats NFTs to provide SC2 a 2.5 percent royalty for each secondary market transaction in the NFTs and it encouraged individuals to buy and sell the NFTs," the statement further read.

This caused purchasers to spend more than 20 million dollars in around 10,000 transactions. Therefore, according to the SEC:

"SC2 violated the Securities Act of 1933 by offering and selling these crypto asset securities to the public in an unregistered offering that was not exempt from registration."

SEC Division of Enforcement Director Gurbir S. Grewal said:

"It’s the economic reality of the offering – not the labels you put on it or the underlying objects – that guides the determination of what’s an investment contract and therefore a security."

He said that in this case, the entire marketing strategy of the NFT proclaimed that its price could increase, thereby making investors believe that they could profit from selling them in the secondary market. The order finds that it was "hardly surprising" that the entire stock of NFTs sold out in 35 minutes, generating over $8 million, which was then mostly resold in the secondary market.

SEC Home Office Associate Director Carolyn Welshhans said that the registration of securities protected investors with disclosures so they could make informed investment decisions.

"Stoner Cats wanted all the benefits of offering and selling a security to the public but ignored the legal responsibilities that come with doing so."

SC2 did not admit or deny the SEC's findings but agreed to pay a civil penalty of $1 million and a cease-and-desist order. The order also established a Fair Fund "to return monies that injured investors paid to purchase the NFTs."

An agreement was also made to destroy all NFTs in possession of SC2 and publish a notice of the order on its website and social media.

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