SEC Investigates BAYC Creator Yuga Labs

Ephraim Austin

Oct. 11, 2022

The US Securities and Exchange Commission (SEC) is investigating Yuga Labs Inc., the creator of the Bored Ape Yacht Club (BAYC) collection of NFTs, to see if the sales of the NFT collection violated federal law.

According to a Bloomberg report, the SEC is examining whether the non-fungible token (NFT) collection can be considered a security and therefore would need to follow the same disclosure rules as stocks. Additionally, the agency is looking into the distribution of APE Coin which was airdropped to BAYC holders.

“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,” Yuga said in a statement to Bloomberg News. “As a leader in the space, Yuga is committed to fully cooperating with any inquiries along the way.”

The opening of an SEC probe doesn’t mean the agency will sue the firm and Yuga Labs has not been accused of any wrongdoing.

The investigation is just another attempt by Chairman Gary Genslar to regulate Web3 companies. Gensler has repeatedly said that digital assets should not be treated any differently than traditional financial assets and that the SEC should have regulatory control of these assets. In the past two years the SEC has brought dozens of enforcement cases against digital asset firms for failing to register their offerings, including a $50 million penalty against BlockFi Inc. in February. In early October of this year
the SEC announced charges against Kim Kardashian for touting on social media a crypto asset security offered and sold by EthereumMax without disclosing the payment she received for the promotion.

About Yuga Labs

Yuga Labs is a technology company that specializes in blockchain and cryptocurrencies. The entity is well-known for developing NFTs such as the Bored Apes Yacht Club (BAYC).

BAYC is a collection of 10,000 algorithmically generated NFTs of cartoon apes. As of 2022, the project boasts a total of $1 billion in sales. Bored Apes is owned by several celebrities including Justin Bieber, Madonna, Neymar, Paris Hilton, Snoop Dogg, and DJ Steve Aoki.

In late March, Yuga Labs raised $450 million in a massive round led by venture capital firm Andreessen Horowitz. After the fundraising round which also included Animoca Brands, FTX, and The Sandbox, the company’s value rose to $4 billion. In the same month, the company ramped up their operations with the acquisition of NFT projects CryptoPunks and Meebits. 

The company funneled most of the raised capital to finance their “Otherside” metaverse, which integrate characters from NFT collections as avatars. Moreover, the project combines the Web3-enabled virtual world with elements of Massively-Multiplayer Role-Playing Games (MMORPG)

 In July Yuga Labs launched Otherside and managed to sell $1 billion worth of digital real estate to “Voyagers” (virtual land prospectors). The company also provided 4,500 Voyagers access to the metaverse.

ApeCoin Launch

Yuga Labs’s launch of BAYC’s native token ApeCoin ($APE) this year, is one of the most significant developments in the brand’s expanding ecosystem. According to sources, $APE amassed a multibillion dollar market cap on the first day of trading. 

Holders can utilize $APE as a currency within the APE ecosystem. The token can also provide access to products and services, or serve as incentives to third-party developers participating in the network. Furthermore, $APE is also a governance token that works within the ApeCoin DAO (click here to learn more about DAOs).

As of this writing, $APE is trading at $4.73, down 9.6% in the last 24 hours, with a $1,452,829,529 market cap, and a 24-hour volume of $279,444,710.