SEC strikes again in regulating NFTs, will royalties also face a "iron fist"?

In the NFT trading market, gambling is becoming more prevalent. Is "casino-ification" no longer a joke?

Is Milady's "falling" happening now?

APE DAO plans to use hundreds of millions of dollars to repurchase Yuga-related assets?

BlockBeats takes you through a review of last week's NFT news!

SEC Strikes Again in Regulating NFTs, Will Royalties Also Face a "Iron Fist"?

Half a month ago, the third issue of NFT News reviewed the SEC's first regulatory action on NFT projects. BlockBeats, a legal news outlet, reported on the event in detail as soon as possible. (Recommended reading: NFT Huge Negative? SEC's First Regulatory Action on NFT)

Unexpectedly, the SEC's second regulatory action against an NFT project came so quickly. This time, the "unregistered securities" charge is against the NFT project Stoner Cats. Stoner Cats issued a total of 10,420 NFTs on July 27, 2021, at a price of 0.35 ETH (approximately $800), and sold out within 35 minutes.

Stoner Cats

Without admitting or denying the SEC's investigation findings, Stoner Cats accepted the SEC's cease-and-desist order and paid a civil penalty of $1 million. Stoner Cats also agreed to destroy all NFTs it owns or controls and to post notices about the cease-and-desist order on its website and social media. Additionally, a fair fund will be established to return the funds paid by harmed investors for the purchase of NFTs.

Let's take a look at the details of SEC's allegations against Stoner Cats:

- Before and after being sold to the public, Stoner Cats NFT has undergone extensive media promotion to promote the project on its official website, as well as on social media platforms including podcasts, YouTube, Twitter, Instagram, and Discord, as well as interviews on well-known online and cable TV programs. In these promotions, Stoner Cats and its representatives stated that the proceeds from the NFT issuance will be used for the production of the Stoner Cats network video series, and emphasized the benefits of holding Stoner Cats NFT, including exclusive access to Stoner Cats content, as well as permanent additional access to any other content created by Stoner Cats in the future; exclusive access to the Stoner Cats community on Discord, and the ability to participate in various activities, competitions, and interactions with the creators of the animated program; and the ability for holders to resell their NFT on the secondary market.

- Stoner Cats emphasizes that its team has the qualifications to execute project planning, but its animated work is still far from completion at the time of NFT issuance (the final episode was released 15 months after the issuance). Stoner Cats attempts to convince investors that with their efforts, both the animation and NFT will be successful. In their media campaign, Stoner Cats emphasizes that they have Hollywood producers, famous animators, writers, and editors on their team, and mentions the successful works of these professionals in the past. Stoner Cats also emphasizes that some members of its team have a deep understanding of Crypto projects, especially NFTs. Through these actions, investors expect to profit from the success of Stoner Cats, as a successful web animation could lead to an increase in the value of Stoner Cats NFTs in the secondary market.

- Investors are informed that Stoner Cats NFT is similar to a "ticket", "if people don't appreciate it, you can sell this ticket". Investors are also informed that "the more successful the animation, the more successful your NFT will be".

- After its initial public offering, the Stoner Cats Twitter account frequently boasted about the sales of its NFTs on the secondary market and encouraged the public to buy. Specific instances include: on September 7, 2021, the Stoner Cats official account released an emoji pack, implying that the wisest move during a Crypto market downturn was to "buy more ETH and sweep Stoner Cats' floor"; on August 9, 2021, the Stoner Cats official account emphasized the sales of its last four NFTs priced in ETH, which were respectively $137,493, $124,994, $31,134, and $17,123 in USD; on August 9, 2021, the Stoner Cats official account emphasized that it had 3,376 current holders, as well as a floor price of 0.5 ETH and a trading volume of 3700 ETH at the time.

- Before the release, a programmer from Stoner Cats contacted an NFT trading platform to "verify" the Stoner Cats NFT series, ensuring that their team would receive royalties from secondary market transactions. More importantly, Stoner Cats guarantees to secondary market buyers that they are purchasing genuine Stoner Cats NFTs, which promotes the secondary market trading of Stoner Cats NFTs. Stoner Cats NFTs began trading on the secondary market immediately after being minted. Between July 27, 2021 and June 2, 2022, Stoner Cats NFTs had at least 10,475 secondary market transactions. In these transactions, thousands of buyers spent over $20 million worth of ETH to purchase Stoner Cats NFTs.

Carolyn Welshhans, Deputy Director of Enforcement at the SEC, stated that "securities registration, including cryptocurrencies, can protect investors by providing disclosure to help them make informed investment decisions." "Stoner Cats wants to reap all the benefits of offering and selling securities to the public, but ignores the legal responsibilities that come with doing so."

Of course, there are also people within the SEC who have raised objections to this regulation, including Commissioners Hester M. Peirce and Mark T. Uyeda, who previously raised objections. These two commissioners stated that "whether artists are selling numbered versions of physical prints for fans to display on their walls or selling NFTs for fans to display on social media, artists should receive clear guidance on whether securities laws apply and how they apply. For a long time, artists of all kinds have been struggling to make a living, and NFTs provide them with a potentially viable way to monetize their talents. The fact that money is involved does not turn NFTs into securities." They also used the "Star Wars Early Bird Certificate Package" sold by Kenner Toys in 1977, which included exchangeable Luke Skywalker, Princess Leia, and R2-D2 action figures and membership in the Star Wars Fan Club, to illustrate that Stoner Cats is just a new phenomenon in the digital age.

This is another interesting debate brought up by @Loopifyyy based on ChatGPT's response, questioning whether the fair fund used to compensate NFT investors in the ban was established by the $1 million fine paid by Stoner Cats. As a result, NFT players have entered into a mocking mode towards Stoner Cats and the SEC, believing that Stoner Cats can still be happy after earning $8 million and spitting out $1 million, while also believing that the SEC is just collecting "protection fees" and not really protecting NFT investors. However, if we consider the mint price of about $800 at the time, $1 million is far from enough to compensate... In addition, the detailed ban also mentions that Stoner Cats must provide a list of wallet addresses held to the SEC, so this compensation may not be targeted at the initial minters as some in the English-speaking community understand it to be.

I feel like this mockery came too early... However, the most crucial point is that from the SEC's two accusations, it is not a necessary condition to promise dividends directly, and Stoner Cats drew a pie and delivered it in the end, but still had to face the "iron fist" ...

As long as everyone reads the details of the allegations above, they will definitely feel how sufficient the SEC's evidence collection is for "shouting orders", and more and more NFT projects are bound to start trembling...

在 NFT 交易市场里开赌，「赌场化」不再是调侃？

translates to

Is "gamification" no longer a joke in the NFT trading market?

After the bear market, everyone will always lament pessimistically, "The NFT market is becoming more and more like a casino," and I am no exception. But this time, the NFT trading market is really starting to gamble...

Take a look at LooksRare's official Twitter account, and you'll notice that they've been promoting a new feature called "YOLO" recently. If you're a player of games with developed skin markets like CSGO or DOTA2, you definitely won't be unfamiliar with this "YOLO" - it's a "roulette" that allows you to throw in some junk skins and potentially win all the skins in the game.

It's simple. Every NFT player can gamble with their ETH/ERC-20 Token/ERC-721 NFT. The minimum amount to gamble is 0.01 ETH or equivalent. The probability of winning for each player is determined by their investment amount divided by the total investment amount of the round. For example, if you invest 0.5 ETH and all players invest a total of 10 ETH in the round, your winning probability is 5%. In addition, LooksRare will take a 5% cut from each round of "roulette".

After the countdown ends, the wheel of fate begins to turn. The most common occurrence is, of course, the big whale taking all the small shrimp's money, but as you know, there will always be our favorite stories of small shrimp defeating the big whale...

For example, in this round, the player only bet 0.1 ETH and with a winning probability of 2.6%, defeated the big whale who bet 2.7 ETH with a winning probability of 70.31%, and took away the prize pool of 3.84 ETH. The player soared directly...

Aside from LooksRare, Magic Eden also launched a new feature called "Lucky Buy" last week. Unlike "YOLO", "Lucky Buy" is targeted towards a single NFT. For example, if an NFT's listing price is 20 SOL, a buyer can choose to spend 10 SOL on "Lucky Buy" and have a 50% chance of purchasing the NFT at the price of 10 SOL. If the attempt fails, the SOL will be collected by Magic Eden, and the seller and creator will receive a 1% share. The unsuccessful player will receive Magic Eden's "diamond" as a consolation prize.

"Lucky Buy", currently only supports the Degenerate Ape NFT series.

Although they are all "pumping", Magic Eden seems to be relatively mild. After all, we can also understand this as a means of active NFT trading liquidity, and sellers and creators can also benefit. However, the NFT market has indeed bottomed out, and the trading market is not active. We can only bite the lighter like Dao Ge...

Milady "Falling" in Progress?

Milady, the past week has seen a decline of over 30%.

Milady Price Trend

What happened? First of all, in the Milady ecosystem, there is a project called "Bonkler" that is auctioned daily like Nouns.

「Bonkler」

On September 11th, Milady founder @CharlotteFang77 tweeted that a developer from Bonkler had embezzled about $1 million in assets from Bonkler's treasury and attempted to take control of Milady's social media accounts. The developer also filed lawsuits against three individuals in the name of both themselves and their parent company, Remilia.

On September 13th, Remilia's creative director @Milady_Sonoro tweeted to refute Charlotte Fang's accusations. @Milady_Sonoro stated that the Bonkler treasury was not stolen (which is confirmed by on-chain data), and claimed that they were co-founders of Remilia, which was established only after the release of the Milady series for a year and the Remilio series for four months. Charlotte Fang not only does not have the sole ownership of Milady's assets, but also suppresses their status and contributions. In addition, @Milady_Sonoro also accused Charlotte Fang of embezzling a total of 2.6 million US dollars.

On the same day, Charlotte Fang fought back, claiming that Remilia company never had a "co-founder", and any promises about equity distribution have not yet been made. She has the sole control over the assets used to provide funding for Remilia's blockchain operations. The ownership of Bonkler's contract has not been transferred to the agreed address, and the national treasury assets are under serious threat. Charlotte Fang also stated that she received very little salary, while @Milady_Sonoro received the most generous salary and even promised her 20% of Bonkler's income.

This incident has caused huge damage to Milady. Not only has the team experienced "internal strife", but also because the reason for this "internal strife" is the issue of profit distribution (at least that's the impression given to everyone at the moment). For a PFP project that is centered around decentralized memes as its core competitiveness, if this matter is not handled properly, it is very easy for everyone to feel that Milady is "no longer pure" and lose community cohesion.

This may sound a bit abstract. If you can't understand this kind of huge damage, you can think about the incident with Azuki a while ago. However, one is that the community no longer trusts the long-term vision of the project, and the other is that the community believes that the cultural identity established by the project has been disillusioned.

Here I have to admire the keen sense of our colleagues in the encryption industry. Last month, a senior colleague chose to sell Milady, simply because he felt it was "no longer pure". While I, with a strong taste of being a leek, said, "Although it is a very low probability event, Milady may surpass BAYC this year, but it is not impossible."...

As I write this, my heart is full of shame... Shame!

APE DAO to use hundreds of millions of dollars to repurchase Yuga assets?

"Brother Maji" Huang Licheng initiated the AIP-304 proposal in July this year. The proposal plans to use 11 million $APE from the APE DAO treasury to purchase Yuga series assets (BAYC, MAYC, BAKC, and CryptoPunks) and other famous NFTs (art and others) to form an asset collection called the "Digital Art Movement". Then, the NFTs in this collection will be curated and awarded to famous art institutions such as the Los Angeles County Art Museum, the Getty Center, the Louvre, and the Metropolitan Museum of Art. The proposal also includes the issuance of $DAM Token to transfer the governance of the asset collection to the ApeCoin community. Huang Licheng himself promised not to control any asset-related keys or receive any compensation for himself from this proposal.

The proposal will begin voting on September 15th and voting will end on September 21st. Currently, the support and opposition rates are almost 55-45, with no clear winner. However, Huang Licheng himself has not yet participated in the vote.

My personal opinion is that the vision of this proposal is still feasible. If the bored apes can settle in the Louvre, the publicity effect will definitely be significant. However, this proposal lacks many specific operational details. For example, if we want to give a bored ape to the Louvre, will they be willing to accept it? If we negotiate to exhibit a specific bored ape, are there any measures in place to ensure that there is no leakage of information? After all, if it is leaked in advance which bored ape will be exhibited at the Louvre, it will cost a lot to buy that bored ape...

Also, do we really need to spend so much money buying so many NFTs to exhibit in various regions? Considering the continuous decline in the value of $APE, this may not be a good idea. From the current progress of the vote, the community's approval of this idea is not high.

Weekly Project Outlook

Projects worth paying attention to this week include:

Nakamigos-CLOAKS

I admit that I still like these graphics (at least from the preview), and as the second generation of Nakamigos, this project is definitely worth paying attention to. But I have to say, Satoshi's image has completely collapsed...

Nakamigos-CLOAKS has the same total supply as Nakamigos, which is 20,000. The problem arose when the official announcement stated that these 20,000 would be fully charged at 0.05 ETH each, even for first-generation Nakamigos holders. Although the Nakemigos community strongly protested and the project changed to allow Nakamigos holders to mint for free, I am still not optimistic about this project. Like the cultural identity issues that arose with Milady, Nakamigos is also a decentralized meme project that is inseparable from its art. Projects like this make people feel that "purity" is really, really important. From announcing his "retirement" to coming back and turning the "End of Sartoshi" series into Pass cards and bringing out the Nakamigos project that has already earned millions of dollars in royalties, Sartoshi has already lost the "purity" label given to him by mfers (of course, I think he lost it even earlier with the royalty issue).

Speaking of the "End of Sartoshi" series, yes, the holders of "End of Sartoshi" have also been forgotten...

Anyway, the size and popularity of Nakamigos' community are still there. The project will be released on September 21st, and we still need to keep an eye on it.

Nyan Balloon Season 3

At the beginning of the year, there was a wave of ERC-1155 burning gameplay. I reported on it in an article titled "NFT's 'Art Gamification': Burn-Redeem and Lottery Tickets", and also mentioned one of the star projects at the time - "Nyan Balloon" personally created by the founder of Rainbow Cat.

Actually, after the end of the first season, Nyan Balloon has been continuing, and the second season introduced more different flying rainbow cat images that can be obtained through burning. Now, the second season is about to end, and the third season will have more new images, such as this lumberjack rainbow cat flying with a mushroom balloon:

Of course, this project may be more suitable for consumers and may not have much hype... However, I like Hello Kitty :)

SOMO

Last week, Sugartown, which was mentioned in the NFT news, has risen to a price of 0.3 ETH after Free Mint. It seems that at this stage, everyone still favors and has confidence in gaming projects.

SOMO will probably be an elf combat game, collecting, upgrading, fighting, and earning tokens. The description on the Premint page says that it is led by former directors of Jam City and members from EA, Rockstar, Blizzard, and other teams. It may not have the same level of recognition as Zynga's Sugartown, but with the expectation of tokens, it's worth keeping an eye on...

PROJECT ZIRCON

This is also a gaming project, and compared to SOMO, it has a really big background. It is Konami's first Web3 gaming project. If you are unfamiliar with Konami, you may have a hard time not having played "Contra". They also have "Pro Evolution Soccer", "Metal Gear Solid", "Silent Hill", and so on.

This game is still very mysterious and there is hardly any information that can be shared in this article. However, they will showcase the project at the Tokyo Game Show on September 21, so be sure to keep an eye on it.

Conclusion

This is the 5th issue of "NFT News" by Lüdong. Last week's events were still very interesting, and I hope that this article not only provides you with valuable information, but also makes you smile while reading. In addition, although there were no NFT projects with strong wealth effects last week, the rise of Sugartown still gives us some expectations for game-related NFT projects. This week, I will work hard to explore more game-related NFT projects, and I look forward to sharing more information with you next week.

Let's look forward to what fresh NFT news will happen in the new week together!

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