SEC order found Flyfish Club’s $14.8 million NFT offering unregistered

The U.S. Securities and Exchange Commission issued a settled cease-and-desist order on September 16, 2024, finding that Flyfish Club had conducted an unregistered offering of crypto-asset securities through non-fungible tokens used as memberships for a planned New York restaurant. Flyfish agreed, without admitting or denying the findings, to pay a $750,000 civil penalty and accept restrictions affecting its NFTs and secondary-market royalties.

The action mattered because the tokens had an obvious consumptive function: holders needed one to access the members-only restaurant. The Commission nevertheless treated their offer and sale as investment contracts, extending its NFT enforcement theory into a product that combined a real-world membership with transferability, leasing and profit-oriented promotion.

The financing and the SEC’s case

According to the order, Flyfish offered and sold approximately 1,600 NFTs between August 2021 and May 2022, raising approximately $14.8 million to finance construction and operation of the club, restaurant and bar. Regular Flyfish NFTs sold for 2.5 ether, which the order valued at approximately $8,400 at the offering, while Omakase NFTs sold for 4.25 ether, then approximately $14,300. The Omakase version added access to a private sushi room.

The SEC’s theory did not rest on blockchain technology alone. It focused on how Flyfish marketed the tokens and used pooled proceeds. The order said principals connected token value to the restaurant’s success, promoted resale at appreciated prices and described monthly leasing as a passive-income strategy. It also said approximately 42% of buyers acquired more than one NFT even though one was sufficient for membership.

The Commission found that purchasers reasonably expected profits from Flyfish’s managerial and entrepreneurial work, making the offering an investment-contract offering under the Howey test. It found violations of Sections 5(a) and 5(c) of the Securities Act because no registration statement was filed or effective and no exemption was available.

Those were Commission findings entered through a settlement, not a judicial ruling after a contested trial. The order expressly says its findings are not binding on any other person or entity.

What the settlement required

Beyond the $750,000 penalty, Flyfish agreed to destroy NFTs in its possession, custody or control within 10 days; publish notice of the order; remove links to crypto trading platforms; stop accepting royalties from future Flyfish NFT sales; and assist SEC staff with any distribution plan, including by supplying holder blockchain addresses.

The penalty was scheduled in three installments: $350,000 within 14 days, $200,000 by December 31, 2024, and $200,000 within 12 months of the order. These were payment obligations established on September 16, not evidence in this reconstruction that every later installment was completed.

The order also supplied historical trading figures from one unnamed platform. For December 2021 through May 2022, it reported 1,441 regular-token resales at an average dollar-equivalent price of $12,814 and 284 Omakase resales averaging $27,163. It said purchasers spent approximately $26.2 million on that platform and Flyfish received approximately $2.7 million in 10% royalties. Those figures are the SEC’s venue-specific findings, not a complete cross-market dataset or September 16 price snapshot.

A split inside the Commission

Commissioners Hester Peirce and Mark Uyeda dissented on September 16. They argued that the NFTs were utility tokens representing restaurant memberships and that potential resale or leasing profit did not transform them into securities. Their objection highlighted the unresolved boundary exposed by the case: when does promotion of a transferable consumer entitlement turn its sale into an investment contract?

The order gave the SEC an enforceable resolution against Flyfish, but it did not create a generally applicable NFT rule or bind courts evaluating other projects. For NFT issuers on September 16, 2024, the practical signal was narrower: a real-world use would not necessarily prevent enforcement when fundraising, managerial dependence and profit-focused marketing were also present.