Yuga Labs Inc., the NFT juggernaut behind the Bored Ape Yacht Club and other splashy collections, is being investigated by the U.S. Securities and Exchange Commission, Bloomberg News reported Tuesday.
SEC officials are reportedly investigating whether NFTs issued by the company should be subject to similar disclosure rules to traditional securities such as stocks. The SEC is also looking into the distribution of ApeCoin, which went live last March, Bloomberg reported.
ApeCoin, the token for the Yuga ecosystem, plunged 6% after the news broke. Yuga, which was valued at $4B following a $450M fundraising earlier this year, has been the pacesetter in the burgeoning NFT space.
An SEC probe may not necessarily lead to action against Yuga. The Miami-based company, which also features CryptoPunks and Meetbits, said it is “committed to fully cooperating with any inquiries” in a statement to Bloomberg.
Farokh Sarmad, one of the biggest influencers in the NFT space, isn’t surprised at the probe. “This was expected tbh,” he tweeted. They are one of the biggest companies to come out of the space.”
High Profile Target
With backers such as venture capital firm a16z and celebrities like NBA superstar Stephen Curry showing off their Bored Apes online, Yuga may be the highest profile crypto platform yet to be targeted by the Feds. Earlier this year, Yuga produced a massive sale of its Otherside NFTs, which are destined for the metaverse.
Yuga developed Bored Apes, which at over 833,000 ETH, has the second most volume all-time among NFT collections, according to CoinMarketCap. Yuga also bought the intellectual property for CryptoPunks, the NFT collection with the highest all-time volume, last March.
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The news comes as U.S. regulators are making good on their vow to crackdown on the largely unregulated crypto market. Last month, Gary Gensler, the chair of the SEC, suggested that Proof of Stake networks such as post-Merge Ethereum may be required to comply with securities laws that govern the issuance of securities such as stock and bonds.
The SEC’s counterpart in the derivatives markets, the Commodity Futures Trading Commission, is also making cases against crypto platforms that fail to register their offerings with the federal agency. In September, it sued a DAO and imposed a $250,000 penalty after alleging it was operating like a registered derivatives dealer.