Leading NFT Firm Yuga Labs Faces Regulatory Scrutiny from the SEC

The investigation revolves around the BAYC NFT sales and ApeCoin distribution.

Oct 12, 2022
by Akira Ming
Leading NFT Firm Yuga Labs Faces Regulatory Scrutiny from the SEC
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SEC investigates BAYC creator Yuga Labs on the grounds of securities violations

The U.S. Securities and Exchange Commission (SEC) has launched a probe into Yuga Labs, the Web3 firm behind the Bored Ape Yacht Club (BAYC) NFT collection. 

According to a report from Bloomberg, the SEC is investigating whether BAYC NFTs are closer to stocks and thus should follow the same disclosure rules. Furthermore, the financial watchdog is currently looking into the distribution of ApeCoin, a token given out to BAYC, MAYC, and BAKC holders in March. 

However, Yuga has not been accused of any wrongdoing, and no charges may be filed against the firm despite the investigation. A spokesperson for Yuga Labs has confirmed that it is now cooperating with the SEC's probe into the matter.

"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," said the spokesperson.

ApeCoin dropped over 9%

The news comes at a time when SEC is ramping up enforcement actions against the crypto industry at large. At one point, ApeCoin fell more than 9% after news of the Yuga Labs probe came out. The token has since recovered slightly, trading at $4.66 as of writing. 

SEC's hostile attitude against Web3 companies

With several successful legal battles waged against other crypto platforms in the past, the SEC is well-known for showing hostile behavior against crypto industry players. 

Since March, the agency has been reviewing whether NFTs can be considered securities. If Yuga Labs gets charged by SEC, especially for its NFT sales, it will be a watershed moment setting a precedent for NFTs as securities. 

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