SEC Probing Bored Ape Creator Yuga Labs Over Unregistered Offerings: Report

Rosie Perper is the Senior Editor for CoinDesk Learn, focusing on crypto explainers across blockchain, cryptocurrency, NFTs and DAOs. She has previously worked across breaking news, global finance, tech and culture, and holds a small amount of BTC and ETH.

The SEC is probing Yuga Labs, the creator of the Bored Ape Yacht Club NFT collection, over whether sales of its digital assets violate federal law, according to a report from Bloomberg, citing an unnamed source close to the matter.

At issue, the source said, is whether some of Yuga’s NFTs are closer to stocks and thus should follow the same disclosure rules. The key legal question at the center of the probe, according to Bloomberg, is whether NFTs are securities - a question that the SEC has reportedly been investigating since March. People familiar with the matter said at the time that NFT creators and crypto exchanges were being looked at.

The SEC is also reportedly looking into how ApeCoins, the Ethereum-based governance and utility tokens used within the APE ecosystem, were distributed to holders of Bored Ape Yacht Club, Mutant Ape Yacht Club and Bored Ape Kennel Club members. The tokens were first announced in March alongside the establishment of the community-driven ApeCoin DAO and the Ape Foundation. Sixty-two percent of the fixed one billion supply of ApeCoins was allocated to the ApeCoin community, including 15% airdropped to existing NFT holders. Additional percentages of tokens were allocated to Yuga Labs and the Jane Goodall Legacy Foundation, alongside launch contributors and the four founders of Bored Ape Yacht Club.

CoinDesk noted at the time that the accompanying press materials went to great lengths to distance ApeDAO’s token launch from the Bored Ape Yacht Club NFT collection. "Club-style NFTs with perks for long-term members can start to resemble investment contracts, which, in the U.S., are overseen by the Securities and Exchange Commission (SEC)."

ApeCoin was falling almost 8% following the publication of Bloomberg’s story.

Read more: What Is ApeCoin and Who Is Behind It?

A spokesperson for Yuga Labs confirmed that it was cooperating with the SEC's probe into the matter.

"It’s well-known that policymakers and regulators have sought to learn more about the novel world of Web3. We hope to partner with the rest of the industry and regulators to define and shape the burgeoning ecosystem. As a leader in the space, Yuga is committed to fully cooperating with any inquiries along the way.”

The SEC declined to comment.