The U.S. Securities and Exchange Commission is reportedly investigating Yuga Labs Inc., the creator of leading nonfungible tokens such as the Bored Ape Yacht Club, over whether the company’s sale of digital assets violates securities laws.

Bloomberg, referencing a person familiar with the matter, claims that the SEC is examining whether certain NFTs from Yuga Labs are securities and should follow the same disclosure laws. The investigation is said to extend not only to Yuga Labs NFTs but also to the company’s distribution of ApeCoin, which is given to Bored Ape Yacht Club holders.

The report notes that Yuga has not been accused of any wrongdoing as of yet and that an SEC probe does not necessarily mean the agency will pursue action. However, where there is smoke, there is often fire. The SEC typically doesn’t launch an investigation unless it believes there may be potential wrongdoing.

In response, Yuga is positively spinning the investigation, with a spokesperson bizarrely telling Bloomberg that the investigation is due to policymakers and regulators seeking 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,” the spokesperson said. “As a leader in the space, Yuga is committed to fully cooperating with any inquiries along the way.”

Although Yuga Labs may be right that NFTs and related Web3 products are novel and somewhat new, the SEC hasn’t been shy in pursuing cryptocurrency and blockchain companies previously. If it finds that Yuga has not been complying with securities law, it could come down hard on the company.

The NFT market, which for a short period was the next big thing but has since seen trading volumes crash 97%, is somewhat reminiscent of the early days of bitcoin and other cryptocurrencies. Arguably the market is in its Wild West stage with various dodgy players, some bigger, more established players and the emergence of support companies such as Tokenproof that work to stop Web3 scams.

The amount of money involved in NFTs has also prompted hackers to target the sector targeted, notably with the theft of Ethereum and NFTs from Yuga’s Discord server in June and a hack of the BAYC Instagram account in April. The latter resulted in the theft of about $3 million in NFTs.

Image: Yuga Labs