TL;DR
- CyberKongz receives a Wells Notice from the SEC, suggesting possible violations of securities laws, which could lead to legal actions against the project.
- The CyberKongz team rejects the accusations, arguing that the SEC misinterpreted a contract migration as a sale, and criticizes the agency’s lack of understanding of blockchain technology.
- This conflict adds to a series of confrontations between the SEC and crypto projects, such as the case with OpenSea.
The CyberKongz NFT collection has received a notice from the U.S. Securities and Exchange Commission (SEC), known as a Wells Notice, indicating that the project could be violating securities laws.
This notice signals that the SEC is preparing legal actions against the project. In response, the CyberKongz team expressed their surprise and disappointment at the regulator’s approach, arguing that the interpretation of the project’s activities shows a lack of understanding of blockchain technology. Since the SEC’s first contact two years ago, the team has been dealing with what they consider to be unfounded accusations and errors in the information provided by the regulator.
CyberKongz, launched in 2021 by artist Myoo, is a collection of unique NFTs featuring pixelated gorilla images known as Genesis Kongz. This collection was a pioneer in the use of NFTs as profile pictures (PFPs), a concept that was still novel at the time. With an affordable initial price of 0.01 ETH, CyberKongz quickly gained popularity and stood out for its approach within the NFT space. The initial success of the collection cemented CyberKongz as one of the leading forces in the PFP NFT ecosystem.
CyberKongz: The SEC Pushes an Anti-Crypto Agenda
The main point of contention between the SEC and CyberKongz is the interpretation that the SEC made of a contract migration that took place in April 2021. The SEC had interpreted this action as a sale, which, according to the CyberKongz team, is a misunderstanding.
The project clarifies that it was not a primary sale of the NFTs but a contract migration, and questions how clear regulation can exist if the SEC cannot distinguish between these two events. Furthermore, CyberKongz expressed its concern about the SEC’s general approach toward cryptocurrencies, suggesting that the agency is trying to impose an anti-crypto agenda without providing clear rules for the industry.
This case is part of an ongoing trend of confrontations between cryptocurrency projects and the SEC. The SEC has also issued Wells Notices to other major platforms, such as OpenSea, the largest NFT marketplace
