Dapper Labs Didn’t Know About Dropped SEC Investigation

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  • Dapper Labs was unknowingly under SEC investigation until last September
  • The SEC dropped the case, offering no reason for its inception of ending
  • Dapper Labs asserts it was never contacted by the SEC about the investigation

Dapper Labs was investigated by the Securities and Exchange Commission (SEC) until last September, when it dropped the case, but the company has no idea why it was being looked into. Fortune reported on the case this week, revealing that the SEC hasn’t disclosed when it began its investigation, the grounds on which it did so, or why it closed it. Dapper Labs noted that it was not aware that any investigation was ongoing, having never been contacted by the SEC over it.

SEC Report Short on Details

Fortune learned about the investigation through a “Case Closing Report” on Dapper Labs Inc. filed by David Hirsch, head of the SEC’s crypto and cyber unit, on September 29. The brief report, spanning just a page, omitted details on the investigation’s cause, commencement, or closure rationale, and Fortune’s requests for further clarity fell on deaf ears.

This lack of transparency has had the unfortunate effect of leading observers to speculate on the nature and scope of the SEC’s scrutiny, and what it tells us about the agency’s thinking when it comes to enforcement.

Class Action Laswuit May be Related

The closure of the probe came after settlements with fellow NFT projects Impact Theory and Stoner Cats, marking the SEC’s inaugural actions against NFT ventures for alleged unregistered securities sales. It is not beyond the realms of possibility, therefore, to think that the SEC was looking into whether Dapper Labs might be guilty of similar offenses.

Dapper Labs is already facing legal action in the form of a class-action lawsuit alleging its NBA Top Shot Moments are unregistered securities. The suit was filed in May 2021 and Dapper Labs failed in an attempt to quash it February last year, providing another link between its offerings and the SEC’s interpretation of securities.