Flyfish Club, LLC, an exclusive NFT-based restaurant project, has reached a $750,000 settlement with the U.S. Securities and Exchange Commission (SEC). The settlement addresses the SEC’s claims that Flyfish conducted an unregistered offering of crypto asset securities when it sold 1,600 non-fungible tokens (NFTs) to U.S. investors, raising $14.8 million.
The SEC stated that Flyfish Club sold NFTs to fund the construction of a high-end restaurant and bar in New York City. Investors who purchased the NFTs were given access to the restaurant, with the potential to sell their membership on secondary markets, a practice the SEC views as constituting an investment contract. The restaurant is expected to open later this month, according to the Flyfish Club’s website.
More than Just Membership Passes
“Flyfish led investors to believe they could earn profits from the business and managerial efforts of its team, specifically in building and operating the restaurant,” the SEC said in its court filing. The agency also noted that Flyfish suggested that NFT holders could profit from reselling their tokens at higher prices in the future, positioning these NFTs as more than just membership passes.
While Flyfish neither admitted nor denied the SEC’s findings, it agreed to several terms as part of the settlement. These include destroying all Flyfish NFTs still in its control within the next 10 days and refraining from accepting future royalties on NFT sales.
SEC’s Stance on the NFT Market
This case marks another in a series of actions by the SEC against NFT projects over the past year. The agency has scrutinized various projects for selling NFTs without proper registration, claiming they constitute securities under U.S. law. Notable cases include charges against podcast studio Impact Theory and Stoner Cats 2 LLC, both accused of unregistered NFT offerings.
The SEC’s aggressive stance on NFTs has sparked debate within the crypto community. Last week, the leading advocacy group for blockchain and digital assets, Digital Chamber, criticized the SEC’s actions as regulatory overreach. The group called on Congress to establish clearer legal definitions for NFTs, asserting that the SEC should not classify many NFTs as financial products or securities.
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