Yuga Labs, the creator of the Bored Apes Yacht Club non-fungible token (NFT) collection, which is also the owner of CryptoPunks, is now under investigation by the US Security Exchange and Commission (SEC) for possibly violating federal law in terms of security.
This is obviously only an investigation, so it is possible that the Miami-based company will not be convicted afterwards.
The SEC is also reportedly investigating ApeCoin, the ERC20 token launched by Yuga Labs and related to the ecosystem of the Bored Apes collection itself. According to the authority, this may also be a security and therefore follow different rules than those adhered to by Yuga Labs regarding utility-type tokens.
“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,”
the team said.
Is Bored Apes a security?
The problem is that if the NFT collection were truly labeled as security assets, it would open up an unprecedented case on many other collections of non-fungible tokens, at that point also considered to be securities and therefore equally actionable by the SEC or other regulators in several countries.
As mentioned, the Miami-based company also owns other NFT collections such as CryptoPunks but also Meebits. The question that therefore arises is whether all of the company’s collections of non-fungible tokens would also be in “jeopardy” and subject to investigation, plus the fact that many drops were based on BAYC so many others could also fall under SEC scrutiny.
Why is the SEC investigating?
According to rumors that spread in late July, a group of investors opened a class action lawsuit against Yuga Labs for selling securities that did not have the guaranteed returns. This news has been making the rounds and may be behind the SEC’s initiation of the case.
The lawsuit alleges that investors were misled by the company, which allegedly promised returns that were later not met. The lawsuit is still in the preliminary stage and lawyers are reportedly still gathering endorsements from investors.
After EOS and Ripple now also ApeCoin
Years back it was the turn of EOS to be condemned by the SEC for being identified as a security. Block.one, the company that had released the token, had to pay a hefty fine of $24 million for raising funds through an ICO because of this.
After EOS, it is now Ripple’s case that is still open as to whether or not XRP can be likened to a security.
Ripple now says it expects an answer from the SEC by 2023, at least according to CEO Brad Garlinghouse.
The latest news on BAYC
The popular Ethereum-based NFT ape collection had already faced problems related to its fame, so to speak.
In late September, a YouTube channel linked to the hacker group Anonymous posted a video in which Yuga Labs is accused of using Nazi symbols in images of Bored Ape Yacht Club NFTs. The video showed dozens of images that appear to be traceable to Nazi iconography, even though these images are not immediately recognizable as pertaining to that iconography.