SEC Investigates Yuga Labs Over Possible Violations

  • The SEC believes cryptocurrencies should be classified as securities.
  • As of now, Yuga Labs has not been charged with any misconduct.

The US Securities and Exchange Commission is reportedly investigating Yuga Labs Inc., the creator of the popular Bored Ape Yacht Club NFT collection of NFTs, on the possibility that the sale of its digital assets has violated federal laws.

The SEC is investigating whether some Yuga Labs offerings are more comparable to stocks and should adhere to the same disclosure regulations. Sources close to the story revealed that the principal watchdog on Wall Street is also investigating how ApeCoin was distributed to Bored Ape Yacht Club owners and other NFTs.

According to the report, Yuga Labs has not yet been charged with any misconduct, and the investigation may not even result in charges. A representative for Yuga Labs confirmed that the company was cooperating with the SEC in their investigation. The statement read,

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 SEC has remained vocal about its ambition to regulate the crypto industry. However, several experts have accused the agency of witch-hunting the industry. The SEC believes some crypto offerings qualify as securities that are different from other assets, such as commodities, in that they require detailed disclosure, informing investors of possible risks and flaws.

The SEC Fights for Crypto Regulation

Since the launch of the first cryptocurrency (Bitcoin) in 2009, there has been much discussion about how to precisely classify the aspects of this decentralized financial ecosystem. The crypto market has been the “Wild West” of the financial market since its emergence, and its decentralized framework has kept it from the prying eyes of the government. But, with the recent cases of hacks and collapses, the SEC is seeking to bring the industry under its jurisdiction.

Gary Gensler, the chair of the SEC, has publicly expressed his concern with the present state of cryptocurrency regulation. Gensler controversially said in June that cryptocurrency exchanges that don’t work with the SEC are working outside of the law and could face enforcement action. The SEC sheriff has maintained that cryptocurrencies are securities. He recently said during an interview with CNBC,

The law is clear. I believe based on the facts and circumstances most of these tokens are securities.

The SEC revealed in May that it was doubling the size of its Cyber and Crypto Assets Unit. Ever since, the Department of Justice (DOJ), Commodity Futures Trading Commission (CFTC), and SEC have increased their involvement in crypto enforcement. The SEC has also charged a series of crypto influencers and service providers for alleged violations. 

The SEC accused Ian Balina, a crypto influencer, of failing to disclose payments he received for promoting an unregistered sale of Sparkster cryptocurrency holdings. Earlier this month, popular reality star Kim Kardashian agreed to a $1.2 million settlement with the SEC related to charges that she failed to reveal the payments she received for endorsing a crypto asset on her Instagram. The fine was reportedly more than what she received for the promotion.

Lawrence Woriji Verified

Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.

Latest News