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SEC Probe is investigating Bored Ape Creators Yuga labs and other NFT projects

According to a Bloomberg story citing an unidentified source familiar with the situation, the U.S. Securities and Exchange Commission is looking into Yuga Labs, the company behind the Bored Ape Yacht Club NFT collection, to see if sales of its digital assets are illegal under federal law. The question, according to the source, is whether some of Yuga’s non-fungible tokens are more comparable to stocks and should therefore adhere to the same disclosure regulations. According to Bloomberg, the main legal issue at the heart of the investigation is whether NFTs are securities. The SEC has apparently been looking into this issue since March. At the time, people with knowledge of the situation claimed that NFT developers and cryptocurrency exchanges were under investigation.

The distribution of ApeCoin, the Ethereum-based governance and utility tokens utilized within the APE ecosystem, to holders of Bored Ape Yacht Club, Mutant Ape Yacht Club, and Bored Ape Kennel Club members is another matter that the SEC is investigating. The creation of the community-run ApeCoin DAO and the Ape Foundation coincided with the first announcement of the tokens in March. The ApeCoin community received 62% of the fixed one billion apeCoin supply, including 15% airdropped to current NFT holders. Along with launch contributions and the four Bored Ape Yacht Club founders, additional token percentages were given to Yuga Labs and the Jane Goodall Legacy Foundation.

It was observed that the supporting press materials seemed to take significant pains to distinguish the token launch by ApeDAO from the Bored Ape Yacht Club NFT collection. This is due to the possibility that club-style NFTs with benefits for long-term members could come to resemble investment contracts and spark the SEC’s attention. Following the publication of Bloomberg’s story, ApeCoin was down about 8%. Yuga Labs’ cooperation with the SEC’s investigation was confirmed by a spokeswoman for the company.

It is common knowledge that regulators and policymakers have a keen interest in learning more about the innovative realm of Web3. To define and sculpt the developing ecosystem, we intend to collaborate with other stakeholders in the sector and with regulators. As a pioneer in the field, Yuga is dedicated to providing full cooperation with all queries, the spokeswoman stated. The SEC chose not to respond.

According to sources, the SEC’s investigation of Yuga Labs is actually a part of a larger study into the nonfungible token (NFT) market, which was first made public in March.

According to a report from Bloomberg on October 11 that cited a source “familiar with the situation,” the SEC is looking into Yuga Labs to determine whether particular NFTs are “more equivalent to stocks” and whether the selling of specific digital assets is in violation of the law. But it makes sense that the examination is a component of the SEC’s ongoing inquiry into the larger NFT market, which is examining whether specific NFTs and fractional NFTs might be subject to federal securities laws.

According to Bloomberg, the regulator is looking into how ApeCoin was distributed to owners of the Bored Ape Yacht Club (BAYC) and other NFTs. Yuga Labs will use APE as the main token for all of its new initiatives, according to the ApeCoin website, and it is a community member in the ApeCoin DAO.