Flyfish Club settles with SEC for $750,000 over unregistered NFT offering

The Securities and Exchange Commission (SEC) has reached a settlement with Flyfish Club – the company behind a high-profile NFT-based restaurant membership project.

The agreement requires Flyfish to pay $750,000 in civil penalties. The penalty is for allegedly conducting an unregistered offering of crypto asset securities.

“Between August 2021 and May 2022, Flyfish conducted an unregistered offering of crypto asset securities by offering and selling to the public, including U.S. investors, approximately 1,600 non-fungible tokens (“NFTs”) at two price points,” the SEC stated in the filing.

SEC accuses Flyfish Club of raising $14.8 million

According to the SEC, Flyfish raised approximately $14.8 million between January 2022 and May 2022. The SEC stated that this was made by selling about 1,620 NFTs to the public, including U.S. investors.

The NFTs were priced at 2.5 ETH (around $8400) and 4.25 ETH (around $14,300) for “Omakase” membership. The membership was designed to grant exclusive access to a members-only restaurant in New York City.

The SEC determined that Flyfish offered and sold these NFTs as investment contracts. The regulator stressed that it classifies them as securities under the Howey test and cited several factors contributing to this classification.

Flyfish agrees to destroy all NFTs in its possession

As part of the settlement, Flyfish has agreed to comply with the SEC’s demands. These include destroying all NFTs in its possession within 10 days, publishing a notice of this order on the Flyfish website and social media channels, and the removal of all links to crypto asset trading platforms from their website and social media channels.

In addition, the company agreed to notify secondary market trading platforms that it will not accept further royalties from Flyfish NFTs and also help the commission staff in the administration of a distribution plan.

The firm has not admitted to nor denied the SEC’s allegations. The $750,000 penalty will be paid in installments. The initial $350,000 is due within 14 days of the order, $200,000 by December 31, 2024, and the final $200,000 within 12 months of the order.