SEC Fines Flyfish Club $750K For Selling Unregistered Securities In The NFT Market

The
United
States
Securities
and
Exchange
Commission
is
yet
to
soften
its
harsh
stance
against
unregistered
securities
in
the
non-fungible
token
market.
In
yet
another
incident,
the
regulatory
commission
has
fined
Flyfish
Club,
a
restaurant
based
in
New
York,
nearly
$1
million
for
offering
unregistered,
non-fungible
token
collections
to
United
States
crypto
investors.

Flyfish
Fined
$750K
For
Trading
Unregistered
NFTs

In
a
September
17

site
publication,
the
United
States
Securities
and
Exchange
Commission
confirmed
that
it
has
settled
with
Flyfish
Club,
which
it
previously
accused
of
selling
illegal
securities
to
United
States
customers.
As
part
of
the
settlement,
Flyfish
Club’s
non-fungible
token
project
has
agreed
to
pay
$750,000.

NFT
project
Flyfish
Club
reached
a
settlement
with
the
US
SEC
for
unregistered
issuance
of
crypto
asset
securities
and
paid
a
fine
of
$750k.
Flyfish
Club
agreed
to
destroy
all
NFTs
and
no
longer
accept
related
royalties.
The
restaurant
raised
$14.8
million
by
selling
1,600
NFTs…

—
Wu
Blockchain
(@WuBlockchain)

September
17,
2024

Flyfish
is
a
curated
members-only
club
and
restaurant
in
New
York,
United
States,
offering
elevated
dining
and
social
experiences.
This
five-star
restaurant
is
backed
by
several
prominent
investors,
including
Gary
Vaynerchuk,
among
others.
The
restaurant
previously
launched
a
non-fungible
token
collection,
giving
members
exclusive
access
to
the
restaurant,
cocktail
lounge,
upscale
restaurant,
intimate
omakase
room,
and
an
outdoor
space.

In
its
findings,
the
United
States
SEC
had
maintained
that
the
Flyfish
Club
offered
unregistered
crypto
asset
securities”
when
it
sold
1,600
NFTs
to
U.S.
investors,
making
$14.8
million.
Flyfish
Club
anticipated
using
the
raised
funds
from
NFT
selling
to
upgrade
its
facility.
But,
after
a
close
consideration,
the
regulatory
commission
insisted:

“Flyfish
Club
led
investors
to
expect
profits
from
the
entrepreneurial
and
managerial
expertise
of
Flyfish
and
its
principals
in
building
and
running
the
restaurant.
Flyfish
Club
told
investors
they
could
potentially
profit
from
reselling
their
NFTs
at
appreciated
prices
in
the
secondary
market.”

In
the
meantime,
the
Flyfish
Club
has
not
admitted
or
denied
the
accusations.
In
return,
the
club
has
agreed
to
pay
$750,000
for
the
settlement.
Moreover,
the
entity
has
agreed
to
destroy
all
Flyfish
NFTs
that
are
still
under
its
control
within
the
next
10
days
and
halt
future
royalties
from
the
sales
of
these
NFTs.
Flyfish
NFT
collection
featured
a
limited
edition
of
2,072
NFTs
hosted
on
the
Ethereum
blockchain
network.

Previous
Legal
Fights
Between
The
SEC
And
NFT
Projects

This
is
not
the
first
time
the
United
States
Securities
and
Exchange
Commission
has
prosecuted
unregistered
NFT
projects.
Last
year,
the
regulatory
commission
charged
the
Stoner
Cats
NFT
project
and
its
parent
company
with
offering
unregistered
NFTs,
raising
over
$8
million
from
United
States
investors.
Fast-forward
to
2024,
the
commission
recently
issued
a
well
notice
to
the
OpenSea
NFT
marketplace,
claiming
that
the
majority
of
NFTs
on
its
platform
are
unregistered
securities.

OpenSea
has
received
a
Wells
notice
from
the
SEC
threatening
to
sue
us
because
they
believe
NFTs
on
our
platform
are
securities.

We’re
shocked
the
SEC
would
make
such
a
sweeping
move
against
creators
and
artists.
But
we’re
ready
to
stand
up
and
fight.

Cryptocurrencies
have
long…

—
Devin
Finzer
(dfinzer.eth)
(@dfinzer)

August
28,
2024

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