BAYC creator Yuga Labs is investigating

A recent report from Bloomberg was published on October 11, 2022 and received a lot of attention. BAYC creator Yuga Labs says he is being investigated by the SEC. The news created a huge wave with ripple effects across the NFT industry. This includes some top NFT collections and marketplaces.

This investigation will verify whether the sale of BAYC NFTs and ApeCoin tokens complies with federal law. However, they did not disclose the actual source and said the SEC investigation is private. A person familiar with the matter said.

The SEC’s involvement in the NFT industry has been known to everyone since March 2022. This was when U.S. regulators questioned whether digital assets are being used to raise money like traditional securities. It actually looks like part of a broader scrutiny of the entire NFT industry.

However, Yuga Labs remains adamant about the investigation and is cooperating with the SEC’s investigation. In an interview with Cointelegraph, a Yuga Labs spokesperson said he wants to learn more about the world of Web3 in order for policymakers and regulators to regulate the industry. To support it, they have ensured cooperation with other members of the industry and regulators in shaping his Web3 ecosystem.

Meanwhile, Yuga Labs also announced a $1 million donation to support arts and education initiatives. The drive takes place in Miami, the birthplace of Yuga Labs and his BAYC collection. The announcement came to light on October 11th, the same day Bloomberg’s report was published. Yuga Labs claims to be investing in Miami’s future and gives back to Miami by supporting young talent.

SEC is also considering ApeCoins

Formed by Yuga Labs-connected members, ApeCoin DAO is an Ethereum-based governance and utility token. Launched and distributed ApeCoins in March 2022. Due to its close relationship with the creator of BAYC, ApeCoin is also under investigation by his SEC.

Bloomberg reported that the SEC is scrutinizing the distribution of ApeCoin. ApeCoins were distributed to owners of the Bored Ape Kennel Club and members of the Mutant Ape & Bored Ape Yacht Club. According to his website for ApeCoin, out of a fixed supply of 1 billion, about 62% of the coins were distributed to his APE community. Remaining 16% to Yuga Labs and charities, 14% to launch contributors and 8% to BAYC founders.

According to Coinmarketcap, ApeCoin was trading at an all-time high above $23 at the end of April 2022. But when Bloomberg’s report was released in October, the price plummeted from $5 to about $4 within 24 hours. As of October 19, the coin is trading at around $4.30, down more than 20% from its all-time high.

Legal Experts Saw This Coming

Multiple legal experts had already anticipated the inquiry as the SEC has been gearing up for crypto regulation in recent months, according to sources. He told the publication he was not surprised and had been anticipating the investigation for the past two years.

Fyre believes targeting BAYC creators makes perfect sense given that SEC is a leading brand in the industry. A lot of investors like BAYC who buy his NFT collection look like they buy shares in companies. He further pointed out that the question is not whether the NFT is a security. It’s really about what exactly the SEC wants to regulate.

Fyre further said that the findings of the study would not change much for creators if NFTs were treated as legal securities. This is because most disclosed information already exists on the blockchain.

Jeremy Goldman, an attorney who specializes in NFTs, opines that the SEC is wise to pursue projects that fit within its security framework. He also believes that multiple projects outside of BAYC make him look like securities to the SEC.

If the SEC wins the lawsuit against Yuga Labs, the entire NFT industry will be concerned. However, we need further updates on our research on how this news will affect the NFT industry.

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