Flyfish Club Settlement

NFT project Flyfish Club, LLC has agreed to pay $750,000 as part of the settlement with the U.S. Securities and Exchange Commission (SEC) as of Monday.

The SEC stated that Flyfish "conducted an unregistered offering of crypto asset securities" by selling 1,600 NFTs to U.S. investors, generating $14.8 million. The NFTs were intended to fund the construction of an exclusive restaurant and bar, known as the Flyfish Club, in New York City.

Owning a Flyfish NFT granted membership to the club, which is set to open this month. The SEC asserted that Flyfish led investors to anticipate profits stemming from the expertise of its principals in establishing and managing the restaurant. They also suggested that investors could potentially resell their NFTs at increased prices in the secondary market.

While Flyfish did not admit or deny the findings, the entity agreed to destroy all Flyfish NFTs under its control within ten days and refrain from accepting future royalties from NFT sales, as per the SEC's order. There was no immediate response from FlyFish regarding these developments.

The SEC has pursued several cases against NFT projects over the past year, including actions against Impact Theory and Stoner Cats 2 LLC for similar unregistered offerings. Recently, OpenSea, a major NFT marketplace, received a Wells Notice from the SEC, indicating a planned enforcement action.

Republican Commissioners Hester Peirce and Mark Uyeda criticized the SEC's settlement, claiming it "undermines trust" in the agency and argued that Flyfish's NFTs should not be classified as securities, but as utility tokens. They contended that while a member of the Flyfish Club could profit from leasing or selling their token, the NFT serves a concrete purpose: needed for dining at the club.

Peirce and Uyeda argued that the Flyfish NFTs represented a method for selling memberships, insisting there should be more regulatory clarity allowing creatives to explore NFTs without excessive legal constraints.