Twitter Thread Points to Otherside NFT Sale as an Unregistered Security Offering

A Twitter thread by CrypTones, an individual who says they are a securities attorney working for a crypto firm, said the Otherside NFT sale is unregistered security as it checks all of the boxes under the Howey Test.

OtherSideMeta is a project created by YugaLabs, the same organization that created BoredApe.

 

 

 

CrypTones states:

“Why do I think selling plots of land in a metaverse constitutes an unregistered securities offering? Because it satisfied the Howey Test. If you’re into #crypto, you’ve likely heard of the “Howey Test,” or the test to determine if something is a security. The Howey Test comes from a 1946 case called SEC v. Howey, in which Howey Co. sold plots of land from its orange grove, which raised $ to fund the grove’s future development. Let’s talk about it, because the Howey land sale mirrors the OthersideMeta land sale in many ways.”

They add:

@yugalabs offered to sell land to a metaverse that it’s building w @Improbableio. Yuga and @animocabrands are selling those plots of land to prospective investors today in exchange for the promise of owning land in a functioning metaverse tomorrow (that has not yet been built).

And;

if @Improbableio stops building the Otherside metaverse, or if @yugalabs quits the project, then all 55,000 current plot-holders are left holding plots of land in a metaverse that will never exist.

Under Howey, you are a security if:

(i) an investment of money by a person; (ii) in a common enterprise; (iii) where the person is led to expect profits; (iv) to be derived from the entrepreneurial or managerial efforts of the promoters of the project you have a security.

I wonder what the SEC’s Crypto Asset and Cyber Unit’s thoughts are on this?

While the operation is governed under Hong Kong law, the SEC has never been shy about going after alleged unregistered securities offerings that involved US investors.



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