SEC Investigates Bored Ape Yacht Club (BAYC) Creator Yuga Labs Over Unregistered Offerings

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The Securities and Exchange Commission (SEC) is investigating Yuga Labs over whether its Bored Ape Yacht Club non-fungible token (NFT) collection and the ApeCoin (APE) token are unregistered securities, according to a report published by Bloomberg.

The report says that the SEC is exploring whether Yuga Labs broke the law by issuing Bored Ape NFTs, which, according to the agency, act similarly to stocks. Yuga Labs confirmed the investigation to Bloomberg.

“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. As a leader in the space, Yuga is committed to fully cooperating with any inquiries along the way,” a Yuga Labs spokesperson said.

The SEC is also looking closely at the distribution of ApeCoin – the Ethereum-based governance token used in the APE ecosystem – that launched this March.

The token was airdropped to holders of Bored Ape Yacht Club, Mutant Ape Yacht Club, and Bored Ape Kennel Club – spinoffs of the original project – to members, the founders, and other entities.

However, the APE token was officially created and launched by the Ape Foundation, which Yuga Labs claims to be only a part of. This approach was chosen precisely due to regulatory concerns, since incentivizing members to hold NFTs to get benefits can resemble investment contracts.

APE crashed 10% following the news. It is trading at $4.71 at the time of writing, or 88% down from its all-time high of $39.40, according to CoinMarketCap.

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The probe isn’t guaranteed to result in any official allegations.

The SEC’s Growing Presence in Crypto

The SEC investigation of Yuga Labs comes only a week after the agency charged reality TV star Kim Kardashian for promoting a pump-and-dump project called EthereumMax on her Instagram account.

The SEC argued that Kardashian failed to disclose the payment of $250,000 she received for the promotion of the project whose native token, EMAX, has since dumped 99%.

Kardashian agreed to pay $1.26 million in penalties, disgorgement, and interest and vowed not to promote any crypto asset securities for three years.

The EMAX token gained 116,000% in only one week after Kardashian posted a video on her Instagram with a link to the EthereumMax website where potential investors could purchase the tokens. It dumped almost immediately.

On the Flipside

  • The SEC probe into Yuga Labs may not necessarily lead to official charges.
    The SEC didn’t provide any comments.

Why You Should Care

The SEC’s investigation of an NFT firm is the first of its kind. While the outcome of this probe might lead to greater regulation in the NFT world, the SEC’s recognition of the NFT industry is a step towards wider adoption.

Read more about BAYC holders’ adventures in the real world:

Bored Ape NFT Holder Opens Physical Bored Yacht Club on the French Riviera

Read more about SEC’s charges against Kim Kardashian:

Kim Kardashian Charged by SEC for Promotion of Scam Project EthereumMax (EMAX), Agrees to Pay Over $1M

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Arturas Skur

Arturas Skur is a blockchain content writer focused on Web 3.0 domains, DeFi, and Ethereum Layer-2s. Arturas believes blockchain technology has the potential to transform how we see and interact with society, economy, and culture. Arturas spends his spare time hiking, playing with his dog, and reading. He has been active in blockchain and cryptocurrencies since 2020.