UNITED STATES OF AMERICA

Agency decision

Ask Donna

What actually matters in this document.

Text

Before the

SECURITIES AND EXCHANGE COMMISSION

ADMINISTRATIVE PROCEEDING

File No. 3-21655

In the Matter of

Stoner Cats 2, LLC,

Respondent.

PROPOSED PLAN OF

DISTRIBUTION

OVERVIEW

The Division of Enforcement submits this Proposed Plan of Distribution (the

“Plan”) to the United States Securities and Exchange Commission (the “Commission”) pursuant

to Rule 1101 of the Commission’s Rules on Fair Fund and Disgorgement Plans (the

“Commission’s Rules”), 17 C.F.R. § 201.1101. This Plan provides for the distribution of a Fair

Fund (the “Fair Fund”), comprised of civil money penalties collected from Stoner Cats 2, LLC

(“Respondent” or “Stoner Cats”) in the above-captioned matter. 1

As described more specifically below, the Plan seeks to compensate investors

who were harmed by the Respondent’s violations described in the Order in connection with the

unregistered offer and sale of crypto assets offered and sold as securities (“Stoner Cats NFTs”)

by Stoner Cats 2 LLC (“Stoner Cats”) on July 27, 2017 (the “Offering”). As calculated using the

methodology detailed in the Plan of Allocation (attached as Exhibit A), investors will be

compensated for their Recognized Loss on Stoner Cats NFTs (the “Security”) purchased or

acquired in the Offering and either held through or sold on or before September 12, 2023. In the

view of the Commission staff and the Fund Administrator, this methodology constitutes a fair

and reasonable allocation of the Fair Fund.

The Commission has custody of the Fair Fund and will retain control of the assets

of the Fair Fund. The Plan is subject to approval by the Commission, and the Commission

retains jurisdiction over its implementation.

See Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making

Findings, and Imposing a Cease-and-Desist Order, Securities Act Rel. No. 11233 (Sept. 13, 2023) (the “Order”).

II.

BACKGROUND

On September 13, 2023, the Commission issued the Order instituting and

simultaneously settling administrative proceedings against Respondent Stoner Cats. In the

Order, the Commission found that on July 27, 2021, Stoner Cats conducted an unregistered

offering of crypto assets offered and sold as securities in the form of non-fungible tokens called

Stoner Cats (“Stoner Cats NFTs” or “NFTs”). According to the Order, Stoner Cats offered and

sold to the public, including U.S. investors, 10,320 NFTs for 0.35 EFT (approximately $800)

each. According to the Order, the offering sold out in 35 minutes and generated gross proceeds

in ETH equal at the time to approximately $8.2 million. The Commission found that Stoner Cats

was required to, but did not, register the offer and sale of Stoner Cats NFTs with the Commission

and no exemption from registration was available. As described in the Order, Stoner Cats thus

violated Sections 5(a) and 5(c) of the Securities Act of 1933. The Commission ordered the

Respondent to pay a $1,000,000 civil money penalty to the Commission. The Commission also

created the Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the

penalty collected can be distributed to harmed investors.

The Respondent has paid in full. The Fair Fund has been deposited in a

Commission-designated account at the United States Department of the Treasury, and any

accrued interest will be added to the Fair Fund.

III.

DEFINITIONS

As used in this Plan, the following definitions will apply:

“Administrative Costs” shall mean any administrative costs and expenses,

including without limitation the fees and expenses of the Tax Administrator and the Fund

Administrator, tax obligations, bond premium expenses, and investment and banking costs.

“Claim Form” means the form designed by the Fund Administrator, in

consultation with the Commission staff, for the filing of claims in accordance with this Plan.

The Claim Form will require, among other things, sufficient documentation reflecting any

Preliminary Claimant’s purchases or acquisitions of the Security during the Offering,

disposition(s) of the Security, and wallet ownership, such that eligibility under the Plan can be

determined; tax identification and other related information from the Preliminary Claimant as

determined necessary by the Fund Administrator in coordination with the Tax Administrator; and

a certification that the Preliminary Claimant is not an Excluded Party. The Claim Form or the

accompanying directions will alert Preliminary Claimants of the OFAC and wallet screening

provisions of the Plan, as set forth in paragraphs 61-63.

“Claim Status Notice” means the notice sent by the Fund Administrator within

120 days of the Claims Bar Date to any Preliminary Claimant that submitted a deficient Claim

Form. The Claim Status Notice will provide to each Preliminary Claimant whose claim is

deficient, in whole or in part, the reason(s) for the deficiency and in the event the claim is denied,

the Claim Status Notice will state the reason(s) for such denial. The Claim Status Notice will

also notify the Preliminary Claimant of the opportunity to cure any deficiency, request

reconsideration, or dispute the determination made by the Fund Administrator and provide

instructions regarding what is required to do so.

“Claims Bar Date” means the date established in accordance with this Plan by

which a Preliminary Claimant’s Claim Form must be postmarked or submitted electronically in

order to receive consideration under the Plan. The Claims Bar Date will be 180 days after the

initial mailing of the Plan Notice. Claim Forms submitted by Preliminary Claimants postmarked

or received after the Claims Bar Date will not be accepted unless the Fund Administrator is

directed to do so by the Commission staff.

10.

“Determination Notice” means the written notice sent by the Fund Administrator

to all Preliminary Claimants who timely submitted a Claim Form notifying the Preliminary

Claimant of its eligibility determination. The Determination Notice will further provide each

Preliminary Claimant that is determined to be an Eligible Claimant with his, her, or its,

calculated Recognized Loss. The Determination Notice will constitute the Fund Administrator’s

final ruling regarding the eligibility status of the claim.

11.

“Distribution Payment” means a payment from the Fair Fund to a Payee in

accordance with the terms of this Plan.

12.

“Eligible Claimant” means a Preliminary Claimant, who is not an Excluded

Party, who submitted a valid Claim Form and has suffered a Recognized Loss, as calculated in

accordance with the Plan of Allocation.

13.

“Excluded Party” shall mean:

(a)

The Respondent;

(b)

Present or former officers or directors of Respondent or any assigns,

creditors, heirs, distributees, spouses, parents, dependent children, or

controlled entities of any of the foregoing Persons or entities;

(c)

Any employee or former employee of the Respondent or any of its

affiliates who has been terminated for cause or has otherwise resigned, in

connection with the conduct described in the Order;

(d)

Any Person who, as of the Claims Bar Date, has been the subject of

criminal charges related to the conduct described in the Order or any

related Commission action;

(e)

Any firm, trust, corporation, officer, or other entity in which Respondent

has or had a controlling interest;

(f)

The Fund Administrator, its employees, and those Persons assisting the

Fund Administrator in its role as the Fund Administrator;

(g)

Any purchaser or assignee of another Person’s right to obtain a recovery

from the Fair Fund for value; provided, however, that this provision shall

not be construed to exclude those Persons who obtained such a right by

gift, inheritance, or devise; or

(h)

Any person who is confirmed by the Fund Administrator through Wallet

Screening or otherwise, to be subject to sanctions as set in paragraphs 6163.

The Claim Form will require claimants to certify that they are not an Excluded Party. All

Excluded Parties will be deemed ineligible to participate in the distribution of the Fair Fund.

14.

“Fair Fund” means the fund created by the Commission pursuant to Section

308(a) of the Sarbanes-Oxley Act of 2002, for the benefit of investors harmed by Respondent’s

violations described in the Order.

15.

“Net Available Fair Fund” means the Fair Fund, plus any interest or earnings,

less Administrative Costs.

16.

“Payee” means an Eligible Claimant whose Recognized Loss calculates, in

accordance with the Plan of Allocation, to a distribution amount equal to or greater than $20.00

who will receive a Distribution Payment.

17.

“Person” means natural individuals as well as legal entities such as corporations,

partnerships, or limited liability companies.

18.

“Plan Notice” means a written notice from the Fund Administrator to Preliminary

Claimants: informing them of the Fair Fund, the Plan, and its eligibility requirements; explaining

how to submit a claim, including instructions for any online claims process; and explaining how

to obtain a copy of the approved Plan and Claim Form by request or from the Fair Fund’s

website. The Plan Notice will also be available on the Fair Fund’s website, which is maintained

by the Fund Administrator.

19.

“Plan of Allocation” means the methodology used by the Fund Administrator to

calculate if a Preliminary Claimant has suffered a Recognized Loss. The Plan of Allocation is

attached as Exhibit A.

20.

“Preliminary Claimant” shall mean a Person, or their lawful successors,

identified by the Fund Administrator as having a possible claim to recover from the Fair Fund

under this Plan, or a Person asserting prior to the Claims Bar Date that he, she, or it has a

possible claim to recover from the Fair Fund under this Plan, as a result of purchasing the

Security during the Offering.

21.

“Recognized Loss” means the amount of loss calculated in accordance with the

Plan of Allocation.

22.

“Relevant Period” means the period between July 27, 2017, and September

12, 2023, inclusive.

23.

Offering.

“Security” refers to Stoner Cats NFTs offered and sold by Stoner Cats during the

24.

“Summary Notice” means the notice published in print or internet media that

shall include, at a minimum, a statement of the purpose of the Fair Fund and the Plan, the means

of obtaining a Claim Form and Plan Notice, and the Claims Bar Date. The Summary Notice will

be published three times.

25.

“Third Party Filer” means a third-party, including without limitation a nominee,

custodian, or an intermediary holding in street name, who is authorized to submit and submits a

claim(s) on behalf of one or more Preliminary Claimants. Third Party Filer does not include

assignees or purchasers of claims that are excluded from receiving Distribution Payments under

paragraph 13(g).

26.

“Wallet Screening” is the review of wallets and blockchain transactions further

described below in paragraphs 61-63.

IV.

TAX COMPLIANCE

27.

On October 11, 2024, the Commission appointed Miller Kaplan Arase LLP as the

tax administrator (the “Tax Administrator”) for the Fair Fund to handle the tax obligations of the

Fair Fund. 2 The Tax Administrator will be compensated for reasonable fees and expenses from

the Fair Fund in accordance with its 2022-2024 Engagement Letter Agreement with the

Commission.3

28.

The Fair Fund constitutes a Qualified Settlement Fund (“QSF”) under Section

468B(g) of the Internal Revenue Code of 1986, as amended, 26 U.S.C. § 468B(g), and related

regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5. The Tax Administrator is the

administrator of such QSF, for purposes of Treas. Reg. § 1.468B-2(k)(3)(I) and shall satisfy the

tax-related administrative requirements imposed by Treas. Reg. § 1.468B-2, including, but not

limited to:

(a)

Obtaining a taxpayer identification number;

(b)

Requesting funds necessary for the timely payment of all applicable taxes,

the payment of taxes for which the Tax Administrator has received funds,

and the filing of applicable returns; and

(c)

Fulfilling any information reporting or withholding requirements required

for distributions from the Fair Fund.

See Order Appointing Tax Administrator, Exchange Act Rel. No. 101319 (Oct. 11, 2024).

See Omnibus Order Directing the Engagement of Two Tax Administrators for Appointment on a Case-By-Case

Basis in Administrative Proceedings that Establish Distribution Funds, Exchange Act Rel. No. 94845 (May 4, 2022).

29.

All tax obligations will be paid from the Fair Fund, subject to the review and

approval of Commission staff.

FUND ADMINISTRATOR

30.

On November 13, 2024, the Commission has appointed Epiq Class Action and

Claims Solutions, Inc., as the fund administrator for the Fair Fund (the “Fund Administrator”),

and the Fund Administrator has obtained a bond in the amount of $1,000,000, as ordered. 4

Pursuant to Rule 1105(a) of the Commission’s Rules, 17 C.F.R. § 201.1105(a), the Fund

Administrator may be removed at any time by order of the Commission or hearing officer.

31.

The Fund Administrator will be responsible for administering the Fair Fund in

accordance with the Plan. This will include, among other things, taking reasonable steps to

identify and contact Preliminary Claimants; obtaining contact information for Preliminary

Claimants; establishing a website and staffing a call center to address inquiries during the claims

process; developing a claims database; preparing accountings; cooperating with the Tax

Administrator appointed by the Commission to satisfy any tax liabilities and to ensure

compliance with income tax reporting requirements, including but not limited to Foreign

Account Tax Compliance Act (FATCA); advising Preliminary Claimants of deficiencies in

claims and providing an opportunity to cure any documentary defects; taking antifraud measures,

such as identifying false, ineligible and overstated claims; making determinations under the

criteria established herein as to Preliminary Claimant’s eligibility; advising Preliminary

Claimants of final claim determinations; implementing Wallet Screening; ensuring compliance

with any restrictions on making Distribution Payments in accordance with sanctions imposed by

the United States government, including those administered by the U.S. Treasury’s Office of

Foreign Asset Control (OFAC) and Financial Crimes Enforcement Network (“FinCEN”);

disbursing the Fair Fund in accordance with this Plan, as ordered by the Commission; and

researching and reconciling errors and reissuing payments, when possible.

32.

To carry out the purposes of this Plan, the Fund Administrator is authorized to

make and implement immaterial changes to the Plan upon agreement of the Commission staff. If

a change is deemed to be material by the Commission staff, Commission approval is required

prior to implementation by amending the Plan.

33.

The Fund Administrator may extend any procedural deadline contained in the

Plan for good cause shown, if agreed upon by the Commission staff.

34.

The Fund Administrator is authorized to enter into agreements with third parties

as may be appropriate or necessary in the administration of the Fair Fund, provided such third

parties are not excluded pursuant to other provisions of this Plan. In connection with such

agreements, the third parties shall be deemed to be agents of the Fund Administrator under this

Plan.

See Order Appointing Fund Administrator, Setting Administrator’s Bond Amount, and Authorizing the Approval

and Payment of Fees and Expenses of Administration, Exchange Act Rel. No. 101610 (Nov. 13, 2024).

35.

The Fund Administrator will be entitled to payment from the Fair Fund of

reasonable fees and expenses, including the bond premium, incurred in the performance of its

duties (including any such fees and expenses incurred by agents, consultants or third parties

retained by the Fund Administrator in furtherance of its duties).

VI.

ADMINISTRATION OF THE FAIR FUND

Identification of and Notification to Preliminary Claimants

36.

The Fund Administrator will, insofar as practicable, use its best efforts to

identify Preliminary Claimants from a review of trading records, obtaining records from

registered broker-dealers and investment advisors, and seeking information from any other

source available to it. The Fund Administrator may also engage a third-party firm, after

consultation with and approval of the Commission staff, to assist in identifying Preliminary

Claimants to maximize the participation rate in the Fair Fund.

will:

37.

Within 60 days after Commission approval of the Plan, the Fund Administrator

(a)

design and submit the Plan Notice and the Claim Form to the Commission

staff for review and approval;

(b)

create a noticing and claim database of all Preliminary Claimants based

upon information identified by the Fund Administrator;

(c)

email and/or mail a Plan Notice to each Preliminary Claimant identified

by the Fund Administrator

(d)

establish and maintain a website devoted solely to the Fair Fund. The Fair

Fund’s website, located at www.StonerCatsFairFund.com, will make

available a copy of the approved Plan; provide information regarding the

claims process and eligibility requirements for participation in the Fair

Fund in the form of frequently asked questions; include in downloadable

form, the Claim Form and other related materials; and such other

information the Fund Administrator believes will be beneficial to

Preliminary Claimants;

(e)

establish and maintain a toll-free telephone number, 1-888-896-8824, for

Preliminary Claimants to call to speak to a live representative of the Fund

Administrator during its regular business hours or, outside of such hours,

to hear prerecorded information about the Fair Fund. The toll-free number

will be listed on all correspondence from the Fund Administrator to

Preliminary Claimants as well as on the Fair Fund’s website; and

(f)

establish and maintain a traditional mailing address and an email address

which will be listed on all correspondence from the Fund Administrator to

Preliminary Claimants as well as on the Fair Fund’s website.

38.

The Fund Administrator will publish the Summary Notice on the internet and

media acceptable to Commission staff three times with first publication within 10 days of the

initial mailing of the Plan Notice.

39.

The Commission staff retains the right to review and approve any material posted

on the Fair Fund’s website, any material mailed or e-mailed, and any scripts used in connection

with any communication with Preliminary Claimants.

40.

In all materials that refer to the Claims Bar Date, the filing deadline will be

clearly identified with the calendar date, which is 180 days from the date of the initial

dissemination of the Plan Notice.

41.

The Fund Administrator will promptly provide a Plan Notice and/or Claim Form

to any Preliminary Claimant upon request made by mail, phone, or email prior to the Claims Bar

Date.

42.

The Fund Administrator will attempt to locate any Preliminary Claimant whose

notice is returned as “undeliverable” and will document all such efforts. The Fund Administrator

shall use its best efforts to make use of commercially available resources and other reasonably

appropriate means to obtain updated contact information in response to “undeliverable” notices

and forward any returned notices for which an updated address is provided or obtained. The

Fund Administrator will make available, upon request by the Commission staff, a list of all

Preliminary Claimants whose Plan Notice have been returned as “undeliverable” due to incorrect

contact information and for which the Fund Administrator has been unable to locate current

contact information.

Filing a Claim

43.

To avoid being barred from asserting a claim, on or before the Claims Bar Date,

each Preliminary Claimant must submit to the Fund Administrator a properly completed Claim

Form reflecting such Preliminary Claimant’s claim, together with all required supporting

documentation as the Fund Administrator, in its discretion, deems necessary or appropriate to

substantiate the claim. Without limitation, this information may include third party documentary

evidence of purchases and dispositions of the Security during the Relevant Period, as well as

holdings of the Security at pertinent dates, valid and authenticated wallet and/or exchange

connections as part of an online claim, account statements and/or documentation of centralized

exchange transactions, attributable exchange and/or wallet account information in the form of

screenshots or videos as visual proof of ownership, any requested explanatory information or

attestations, and/or any required personal identification information.

44.

Electronic claims submission is encouraged; the Plan Notice will include

instructions on how Preliminary Claimants can submit their claims electronically via the Fair

Fund’s website. If using the web-based claim filing option, a Preliminary Claimant must submit

his, her, or its claim to the Fund Administrator by 11:59 p.m. EST on the Claims Bar Date. The

Plan Notice will also include instructions for submission of claims if the Preliminary Claimant is

unable to submit his, her, or its claim electronically.

45.

The burden will be upon the Preliminary Claimant to ensure that his, her, or its,

Claim Form has been properly and timely received by the Fund Administrator. A Claim Form

that is postmarked or otherwise received after the Claims Bar Date will not be accepted unless

the deadline is extended by the Fund Administrator for good cause shown, after consultation

with the Commission staff.

46.

All Claim Forms and supporting documentation necessary to determine a

Preliminary Claimant’s eligibility to receive a distribution from the Fair Fund under the terms of

the Plan must be endorsed by a declaration executed by the Preliminary Claimant under penalty

of perjury under the laws of the United States. The declaration must be executed by the

Preliminary Claimant, unless the Fund Administrator accepts such declaration from a Person

authorized to act on the Preliminary Claimant’s behalf, whose authority is supported by such

documentary evidence as the Fund Administrator deems necessary.

47.

When submitting claims to the Fair Fund on behalf of its clients, all Third-Party

Filers must use the electronic filing template provided by the Fund Administrator in this matter.

Third Party Filers that do not comply with the template and format provided by the Fund

Administrator may be rejected. Third Party Filers must also submit a signed master proof of

claim and release, as well as proof of authority to file on behalf of the claimant(s) at the time the

electronic file of transactions is submitted. Failure to do so may result in rejection of the claim.

48.

Each Third-Party Filer must establish the validity and amount of each claim in its

submission. Third-Party Filers must submit such supporting documentary evidence of

purchases, dispositions, and holdings of the Security as the Fund Administrator deems necessary

or appropriate to substantiate each individual claim. Without limitation, this includes the

complete name of the Preliminary Claimant (beneficial account owner) and its TIN (for

individuals) or EIN (for companies), sufficient contact information to confirm the identity of the

beneficial owner, and documentation from the original bank, broker or other institution of

purchases and dispositions of the Security (account statements, confirmations and other

documentation of purchases and dispositions), as well as holdings of the Security during the

Relevant Period. Documentation generated by the Third-Party Filer as well as affidavits in lieu

of supporting documentation will not be accepted unless, for good cause, the Fund Administrator

determines that such documentation is acceptable. The Fund Administrator will have the right to

request, and the Third-Party Filer will have the burden of providing to the Fund Administrator,

any additional information and/or documentation deemed necessary by the Fund Administrator

to substantiate the claim(s) contained in the submission. Documentation from a Third-Party Filer

that is not acceptable to the Fund Administrator will result in rejection of the affected claim(s).

The determination of the Fund Administrator to reject a claim for insufficient documentation, as

reflected in the Determination Notice, is final and within the discretion of the Fund

Administrator.

49.

The receipt of the Security by gift, inheritance, devise, or operation of law will

not be deemed to be a purchase of Security, nor will it be deemed an assignment of any claim

relating to the purchase of such Security unless specifically so provided in the instrument of

inheritance. The recipient of the Security as a gift, inheritance, devise or by operation of law will

be eligible to file a Claim Form and participate in the distribution of the Fair Fund to the extent

the original purchaser would have been eligible under the terms of the Plan. Only one claim may

be submitted with regard to the same transactions in the Security, and in cases where duplicative

claims are filed by the donor and donee, the donee claim will be honored, assuming it is

supported by proper documentation.

50.

Claims on behalf of a retirement plan covered by Section 3(3) of ERISA, 29

U.S.C.§ 1002(3), which do not include Individual Retirement Accounts and such plan’s

participants, are properly made by the administrator, custodian, or fiduciary of the plan and not

by the plan’s participants. The Fund Administrator will distribute any payments on such claims

directly to the administrator, custodian, or fiduciary of the retirement plan. The custodian or

fiduciary of the retirement plan will distribute any payments received in a manner consistent with

its fiduciary duties and the governing account or plan provisions.

51.

The Preliminary Claimant has the burden of notifying the Fund Administrator of a

change in his, her or its current address and other contact information, and ensuring that such

information is properly reflected on the Fund Administrator's records.

Review of Claims and Deficiency Process

52.

The Fund Administrator will review all claim submissions and determine the

eligibility of each Preliminary Claimant to participate in the Fair Fund by reviewing claim data

and supporting documentation (or the lack thereof) and verifying the claim. Each Preliminary

Claimant will have the burden of proof to establish the validity and amount of his, her or its

claim. The Fund Administrator will have the right to request, and the Preliminary Claimant will

have the burden of providing to the Fund Administrator, any additional information and/or

documentation the Fund Administrator deems necessary to support the claim.

53.

The Fund Administrator will provide a Claim Status Notice within 120 days of

the Claims Bar Date to each Preliminary Claimant who has filed a deficient Claim Form with the

Fund Administrator. The Claim Status Notice will provide to each Preliminary Claimant whose

claim is deficient, in whole or in part, the reason(s) for the deficiency (e.g., failure to provide

required information or documentation). In the event the claim is denied, in whole or in part, the

Claim Status Notice will state the reason(s) for such denial. The Claim Status Notice will also

notify the Preliminary Claimant of the opportunity to cure any deficiency, request

reconsideration, or dispute the determination made by the Fund Administrator and provide

instructions regarding what is required to do so.

54.

Any Preliminary Claimant with a deficient claim will have 30 days from the date

of the Claim Status Notice to cure any deficiencies identified in the Claim Status Notice.

55.

Any Preliminary Claimant seeking reconsideration of a denied claim must submit

their request to the Fund Administrator in writing within 30 days of the date of the Claim Status

Notice. All requests for reconsideration must include the necessary documentation to

substantiate the basis upon which the Preliminary Claimant is requesting reconsideration of his,

her, or its claim.

56.

The Fund Administrator will have the authority, in its sole discretion, to waive

technical claim deficiencies and approve claims on a case-by-case basis, or in groups of claims.

Claims Eligibility Determination

57.

Within 180 days of the Claims Bar Date, the Fund Administrator will complete all

claims determinations and send a Determination Notice to all Preliminary Claimants who timely

submitted a Claim Form notifying the Preliminary Claimant of its eligibility determination. The

Determination Notice will further provide to each Preliminary Claimant that is determined to be

an Eligible Claimant with his, her, or its calculated Recognized Loss. The Determination Notice

will constitute the Fund Administrator’s final ruling regarding the eligibility status of the claim.

58.

The Fund Administrator may consider disputes of an Eligible Claimant’s

Recognized Loss calculation if presented in writing to the Fund Administrator within 30 days of

the date of the Determination Notice. Within 30 days of receiving an Eligible Claimant’s

dispute, the Fund Administrator will notify the Eligible Claimant, in writing, of its calculation of

the Eligible Claimant’s Recognized Loss after considering the dispute. This notice will

constitute the Fund Administrator’s final ruling regarding the loss calculations for the claim.

Distribution Methodology

59.

Any Preliminary Claimant, who is not an Excluded Party, who submitted a valid

Claim Form and has suffered a Recognized Loss, as calculated in accordance with the Plan of

Allocation, will be deemed an Eligible Claimant.

60.

No Distribution Payments will be made for less than $20.00. If an Eligible

Claimant’s distribution amount, in accordance with the Plan of Allocation, calculates to a

distribution amount less than $20.00, that Eligible Claimant will be deemed ineligible to receive

a Distribution Payment and his, her, or its distribution amount will be reallocated on a pro-rata

basis to Eligible Claimants whose distribution amounts are greater than or equal to $20.00. All

Eligible Claimants whose Recognized Loss calculates to a distribution amount equal to or greater

than $20.00 will be deemed a Payee and receive a Distribution Payment.

61.

Prior to issuing any Distribution Payments, the Fund Administrator will screen all

Eligible Claimants against OFAC and FinCEN sanctions lists to identify any claimants who are

Excluded Parties under paragraph 13(h) of the Plan.

Wallet Screening

62.

Prior to issuing any Distribution Payments, the Fund Administrator will, using

Chainalysis or another similar blockchain analysis platform, check all wallet addresses provided

by Eligible Claimants in connection with their Claim against sanctions lists issued by the United

States, the European Union, or the United Nations (“Sanctions Lists”). This screening will

detect wallets: (a) specifically identified on the Sanctions Lists, and/or (b) identified as related to

one or more sanctioned wallets identified in (a).

63.

With respect to the wallets described in paragraph 62(b), within 14 days of the

Commission staff’s review and approval of the Wallet Screening results, the Fund Administrator

will send a Wallet Screening Status Notice providing to any Claimant whose wallet is flagged 21

days to dispute their affiliation with or relation to a wallet flagged under 62(a). The Wallet

Screening Status Notice will identify the wallets at issue, as well as the sanctioned wallet address

and, as appropriate, additional details regarding the screening flag so that the Claimant can

respond with a written explanation of the Claimant’s affiliation or interaction with the sanctioned

wallet and any supporting documentation. Within 14 days of receipt of the explanation, the Fund

Administrator will notify the Claimant as to the resolution of the Wallet Screening with respect

to that Claimant.

Establishment of a Reserve

64.

Before determining the amount of funds available for distribution and calculating

each Payee’s Distribution Payment, the Fund Administrator, in conjunction with the Tax

Administrator, will establish a reserve to pay Administrative Costs and to accommodate any

unexpected expenditures (the “Reserve”).

65.

After all disbursements and Administrative Costs are paid, any remaining

amounts in the Reserve will become part of the Residual described in paragraph 88.

Preparation of the Payment File

66.

Within 120 days following the date of the Determination Notices described above,

paragraph 57, the Fund Administrator will compile and send to the Commission staff the Payee

information, including the name, address, calculated Recognized Loss, and the amount of the

Distribution Payment for all Payees (the “Payee List”). The Fund Administrator will also

provide a Reasonable Assurances Letter to the Commission staff, representing that the Payee

List: (a) was compiled in accordance with the approved Plan; (b) is accurate as to Payees’ names,

addresses, Recognized Losses and amounts of their Distribution Payment; (c) includes the

number of Payees compensated; (d) the percentage of the Payee’s Recognized Loss being

compensated by the disbursement from the Fair Fund, and if applicable, the total percentage to

include all prior disbursements; (e) the total amount of funds to be disbursed, and if applicable,

includes the total amount of such funds to be withheld pursuant to paragraph 77; and (f) provides

all information necessary to make a payment to each Payee.

The Escrow Account

67.

Prior to the disbursement of funds from the Net Available Fair Fund, the Fund

Administrator will establish an escrow account (the “Escrow Account”) with a United States

commercial bank that is a well-capitalized financial institution as defined by the Federal Reserve

Act, Subpart D, 12 C.F.R. § 208.43 and that is not unacceptable to the Commission staff (the

“Bank”), pursuant to an escrow agreement (the “Escrow Agreement”) to be provided by

Commission staff.

68.

The Fund Administrator, pursuant to the Escrow Agreement, shall also establish

with the Bank a separate deposit account (e.g., controlled distribution account, managed

distribution account, linked checking and investment account) (the “Distribution Account”),

insured by the Federal Deposit Insurance Corporation (“FDIC”) up to the guaranteed FDIC pass

through limit. The Distribution Account shall be linked with the Escrow Account, and both shall

be named, and records maintained, in accordance with the Escrow Agreement.

69. During the term of the Escrow Agreement, the portions of the Fair Fund transferred

to the Escrow Account (the “Escrow Property”), shall be invested, and reinvested in short-term

U.S. Treasury securities backed by the full faith and credit of the United States Government or

an agency thereof. The investment shall be, of a type and term necessary to meet the cash

liquidity requirements for payments to Payees, tax obligations, and/or fees of the Tax

Administrator and/or Fund Administrator, including investment or reinvestment in a bank

account insured by the FDIC up to the guaranteed FDIC limit, or in money market mutual funds

registered under the Investment Company Act of 1940 that invest 100% of their assets in direct

obligations of the United States Government.

70. The Fund Administrator shall provide duplicate original bank and/or investment

statements on any accounts established by the Fund Administrator to the Tax Administrator

monthly and shall assist the Tax Administrator in obtaining mid-cycle statements, as necessary.

71. The Fund Administrator shall deposit or invest funds in the Escrow and

Distribution Accounts so as to result in the maximum reasonable net return, taking into account

the safety of such deposits or investments. In consultation with Commission staff, the Fund

Administrator shall work with the Bank on an ongoing basis to determine an allocation of funds

between the Escrow and Distribution Account.

72. All interest, dividends, and/or income earned by the Escrow Property will accrue

for the benefit of the Escrow Property. All Administrative Costs associated with the Escrow and

Distribution Accounts will be the responsibility of the Fund Administrator, who may be

reimbursed for said costs as provided in this Plan. No such Administrative Costs may be paid to

the Bank, its agents, and/or its affiliates from the Escrow Property.

Distribution of the Fair Fund

73.

The Fund Administrator will seek to distribute the Net Available Fair Fund to all

Payees only after all Claim Forms have been processed and all Preliminary Claimants whose

claims have been rejected or disallowed, in whole or in part, have been notified and provided the

opportunity to contest or cure pursuant to the procedures set forth herein.

74. Upon the Commission’s staff’s receipt, review, and acceptance of the Payee List

and Reasonable Assurances Letter from the Fund Administrator, the Commission staff will seek

an Order from the Commission pursuant to Rule 1101(b)(6) of the Commission’s Rules, 17

C.F.R. § 201.1101(b)(6), to disburse funds from the Net Available Fair Fund to the Bank in

accordance with the Payee List for distribution by the Fund Administrator in accordance with the

Plan. All disbursements will be made pursuant to a Commission order.

75. Upon issuance of an Order to disburse, the Commission staff will direct the transfer

of funds in accordance with the Payee List to the Bank. The Fund Administrator will then use its

best efforts to commence mailing Distribution Payment checks and/or effect wire transfers

within 10 business days of the release of the funds into the Escrow Account. All efforts will be

coordinated to limit the time between the Escrow Account’s receipt of the funds and the issuance

of Distribution Payments.

76.

All Distribution Payments will be issued by the Fund Administrator from the

Distribution Account. All checks will bear a stale date of 120 days from the date of issuance.

Reissuance of a check must be requested before the stale date, and such request is governed by

paragraph 84.

77.

All Distribution Payments will be preceded or accompanied by a communication

that includes, as appropriate: (a) a statement characterizing the distribution; (b) a statement that

the tax treatment of the distribution is the responsibility of each Payee and that the Payee should

consult his, her, or its tax advisor for advice regarding the tax treatment of the distribution,

however, any backup withholding required under IRC § 3406(a) and the regulations promulgated

thereunder, or withholding required with respect to nonresident aliens (“NRAs”) under Chapter 3

of the IRC, or FATCA-subject Payees under Chapter 4 of the IRC, will be withheld as required

from the Distribution Payment and remitted to the Internal Revenue Service on the Payee’s

behalf; (c) a statement that checks will be void and cannot be reissued after 120 days from the

date the original check was issued; and (d) contact information for the Fund Administrator for

questions regarding the Distribution Payment. The letter or other mailings to Payees

characterizing a Distribution Payment will be prepared by the Tax Administrator and provided to

the Commission staff for review and approval.

78.

All Distribution Payments, either on their face or in the accompanying mailing,

will clearly indicate that the money is being distributed from the Fair Fund established by the

Commission to compensate investors for harm as a result of securities law violations.

79.

Distribution Payments must be made by check or electronic payment payable to

the Payee (the beneficial account owner). A Third-Party Filer shall not be the payee of any

Distribution Payment check or electronic Distribution Payment, nor shall it deposit any

Distribution Payment(s) in its own or an affiliated account. Compensation to a Third-Party Filer

for its services may not be paid or deducted from the Distribution Payment.

80.

The submission of a Claim Form and the receipt and acceptance of a Distribution

Payment by a Payee is not a release of a Payee’s rights and claims against any party.

81.

Electronic or wire transfers may be utilized at the discretion of the Fund

Administrator to transfer approved Distribution Payments to filers of claims on behalf of twenty

(20) or more Payees. Wire transfers will be initiated by the Fund Administrator using a twoparty check and balance system, whereby completion of a wire transfer will require an

authorization by two members of the Fund Administrator’s senior staff.

82.

At the discretion of the Fund Administrator, certain costs that were not factored

into the Reserve, such as bank fees for the return of a payment, may reduce the Payee’s

Distribution Payment. In such situations, the Fund Administrator will immediately notify the

Tax Administrator of the reduction in the Distribution Payment.

Post Distribution; Handling of Returned or Uncashed Checks; and Reissues

83.

The Fund Administrator shall use its best efforts to make use of commercially

available resources and other reasonably appropriate means to locate all Payees whose checks

are returned to the Fund Administrator as “undeliverable.” If new address information becomes

available, the Fund Administrator will repackage the distribution check and send it to the new

address. If new address information for the Payee is not available or if the distribution check is

returned again, the Fund Administrator will void the distribution check, and in its discretion, may

remove such Payee from the distribution and the Distribution Payment will remain in the Fair

Fund for distribution, if feasible, to the remaining Payees.

84.

The Fund Administrator will reissue checks to Payees upon the receipt of a valid,

written request from the Payee prior to the initial stale date. In cases where a Payee is unable to

endorse a Distribution Payment check as written (e.g., name changes, IRA custodian changes, or

recipient is deceased) and the Payee or if a lawful representative requests the reissuance of a

Distribution Payment check in a different name, the Fund Administrator will request, and must

receive, documentation to support the requested change. The Fund Administrator will review the

documentation to determine the authenticity and propriety of the change request. If, in the

discretion of the Fund Administrator, such change request is properly documented, the Fund

Administrator will issue an appropriately redrawn Distribution Payment to the requesting party.

Reissued checks will be void at the later of 120 days from issuance of the original check and in

no event will a check be reissued after 120 days from the date of the original issuance without

the approval of Commission staff.

85.

The Fund Administrator will make reasonable efforts to contact Payees who have

failed to negotiate their Distribution Payment check and take appropriate action to follow up on

the status of uncashed checks at the request of Commission staff. The Fund Administrator may

reissue such checks subject to the time limits detailed herein. If a Distribution Payment remains

uncashed after the stale date the Fund Administrator will instruct the Bank to issue a stop

payment on the check. The Fund Administrator, in its discretion, may remove such Payee from

the distribution, and the allocated Distribution Payment will remain in the Fair Fund for

distribution, if feasible, to the remaining Payees.

Administrative Costs

86.

All Administrative Costs will be paid from the Fair Fund in accordance with the

Commission’s Rules except as otherwise provided herein. Upon completion of the final

distribution, the Fund Administrator will make arrangements, in consultation with the

Commission staff, for the final payment of all Administrative Costs.

Disposition of Undistributed Funds

87.

If funds remain following the initial distribution, the Fund Administrator, in

consultation with the Commission staff, may seek subsequent distribution(s) of any available

remaining funds, in a manner consistent with this Plan, pursuant to the Commission’s Rules.

88.

A residual will be established for any amounts remaining after the final

disbursement to Payees from the Fair Fund (the “Residual”). The Residual may include funds

from, among other things, amounts remaining the Reserve, distribution checks that have not been

cashed, checks or electronic payments that were not delivered or were returned to the

Commission, and tax refunds received due to the Fair Fund’s overpayment of taxes or for waiver

of IRS penalties.

89.

Once the Fund Administrator, in consultation with the Commission staff, deems

further distribution of the Fair Fund to investors infeasible, the Fund Administrator will direct

the Bank to stop payment on all uncashed distribution payments, and return any funds remaining

in the Escrow and Distribution Accounts to the Commission to become part of the Residual.

90.

All funds remaining in the Residual that are infeasible to distribute to investors

will be held by the Commission and transferred to the U.S. Treasury after the final accounting is

approved by the Commission.

Filing of Reports and Accountings

91.

In accordance with Rule 1105(f) of the Commission’s Rules, the Fund

Administrator shall provide to the Commission staff a progress report and a quarterly account

statement in a format to be provided by Commission staff, within 45 days of the Commission’s

approval of the Plan, and shall provide to Commission staff additional reports and quarterly

account statements within 10 days after the end of every calendar quarter. Such progress reports

shall inform the Commission staff of the activities and status of the Fair Fund during the

reporting period, and shall specify, at a minimum, the location of the account(s) comprising the

Fair Fund, including among other things, an interim accounting of all monies in the Fair Fund.

92.

When the final distribution is completed, the Fund Administrator shall provide to

Commission staff a final report summarizing all tasks undertaken and the outcome of its

administrative efforts. The Fund Administrator shall make arrangement for the final payment of

all Administrative Costs, and submit a final accounting of all monies received, earned, spent, and

distributed in connection with the administration of the Plan in a format provided by the

Commission staff. The Fund Administrator will also submit a report to the Commission staff

containing the final distribution statistics regarding distributions to individuals and entities, and

such other information requested by the Commission staff.

Miscellaneous

93.

When administering this Plan, the Fund Administrator, and/or each of its

designees, agents and assigns, may rely on: all applicable law; orders issued by the Commission,

including orders issued by delegated authority; orders issued by an administrative law judge, if

any, appointed in this proceeding; and any records, including records containing investor

information, provided by Commission staff.

94.

Should any additional funds be received pursuant to Commission or Court order,

agreement, or otherwise, prior to the Commission’s termination of the Fair Fund, such funds will

be added to the Fair Fund and distributed, if feasible, in accordance with the Plan, pursuant to the

Commission’s Rules.

Wind-down and Document Retention

95.

The Fund Administrator will shut down the website, P.O. Box and customer

service telephone line(s) established specifically for the administration of the Fair Fund six

months after the transfer of any remaining funds to the Commission, or at such earlier time as the

Fund Administrator determines with the concurrence of the Commission staff.

96.

The Fund Administrator will retain all materials submitted by Preliminary

Claimants in either paper or electronic form for a period of six years from the date of approval of

a final fund accounting. Materials maintained in electronic form must be accessible and readable

for the duration of retention. Upon expiration of this period, and pursuant to the Commission

staff's direction, the Fund Administrator will either turn over to the Commission or destroy all

materials, including documents in any media.

Termination of the Fair Fund

97.

Once the Commission has approved the final accounting, the Commission staff

will seek an order from the Commission authorizing: (a) the transfer of any amounts remaining

in the Fair Fund that is infeasible to return to investors, and any amounts returned to the Fair

Fund in the future that is infeasible to return to investors, to the U.S. Treasury, subject to Section

21F(g)(3) of the Exchange Act; (b) discharge of the Fund Administrator; (c) cancellation of the

Fund Administrator’s bond; and (d) termination of the Fair Fund.

98.

The Fair Fund will be eligible for termination and the Fund Administrator will be

eligible for discharge after all of the following have occurred (a) a final accounting, in a standard

accounting format provided by the Commission staff, has been submitted by the Fund

Administrator and approved by the Commission; (b) all Administrative Costs have been paid;

and (c) any amount remaining in the Fair Fund has been returned to the Commission for transfer

to U.S. Treasury.

99.

Once the Fair Fund has been terminated and funds, if any, are transferred to the

U.S. Treasury, no further claims will be allowed, and no additional payments will be made

whatsoever.

VII.

NOTICE AND COMMENT PERIOD

100. The Notice of Proposed Plan of Distribution and Opportunity to Comment (the

“Notice”) will be published on the Commission’s website at

https://www.sec.gov/litigation/fairfundlist.htm. Any Person wishing to comment on the Plan

must do so in writing by submitting their comments to the Commission within 30 days of the

publication of the Notice: (a) to the Office of the Secretary, United States Securities and

Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090; (b) by using the

Commission’s Internet comment form (https://www.sec.gov/litigation/admin.shtml); or (c) by

sending an email to rule-comments@sec.gov. Comments submitted by email or via the

Commission’s website should include “Administrative Proceeding File Number 3-21655” in the

subject line. Comments received will be available to the public. Persons should only submit

comments that they wish to make publicly available.

Exhibit A

PLAN OF ALLOCATION

This Plan of Allocation 1 is designed to compensate investors based on their Recognized Loss

on the Security, unregistered crypto assets offered and sold as securities called Stoner Cats NFTs,

purchased or acquired from Stoner Cats in the Offering on July 27, 2017, and either held through or

sold on or before September 12, 2023. Investors who did not purchase or acquire the Security from

Stoner Cats in the Offering, or who are an Excluded Party, are ineligible to recover under this Plan.

The Methodology

The Fund Administrator will calculate the amount of loss for each Stoner Cats NFT

purchased or acquired in the Offering (“Recognized Loss per NFT”) as follows:

Stoner Cats NFTs are not fungible. Consequently, the Recognized Loss per NFT will be

calculated for each separately identified Stoner Cats NFT. For each Stoner Cats NFT purchased or

acquired in the Offering and

Sold prior to September 13, 2023 (the date the Order was issued), the Recognized

Loss per NFT is the purchase/acquisition price of the Stoner Cats NFT minus the sale

price, plus the royalty paid by the Preliminary Claimant to the Respondents. 2

For example, if a hypothetical Preliminary Claimant purchased a Stoner Cats

NFT in the Offering for 0.35 ETH and then sold the same Stoner Cats NFT

prior to September 13, 2023 for 0.10 ETH (of which 0.0025 ETH was paid to

the Respondents as a royalty and 0.0025 ETH was paid to the secondary

market trading platform), the Preliminary Claimant’s Recognized Loss per

NFT for that Stoner Cats NFT would be 0.35 ETH – 0.10 ETH + 0.0025 ETH

= 0.2525 ETH.

Sold on or after September 13, 2023, and before December 12, 2023 (i.e., during the

“Lookback Period”), the Recognized Loss per NFT is the lesser of:

the purchase/acquisition price of the Stoner Cats NFT minus the sale price,

plus the royalty paid (if any) by the Preliminary Claimant to the Respondents;

All capitalized terms used herein but not defined shall have the same meanings ascribed to them in the Plan.

For purposes of calculations in this Plan of Allocation, all royalties are assumed to have been paid by the seller.

Purchase amounts and sales proceeds will be converted to U.S. dollars using the appropriate exchange rate as of 11:59

p.m. UTC on the day the funds are paid or received, respectively. All prices mentioned in the calculation are before the

payment of any taxes, commissions, fees, including gas fees and transaction fees, and royalties paid to the Respondent.

That is, the prices exclude the effects of any taxes, commissions, fees, including gas fees and transaction fees, and

royalties paid to the Respondent.

the purchase/acquisition price of the Stoner Cats NFT minus $92.93 (the

average sale price of the Security during the Lookback Period), 3 plus the

royalty paid (if any) by the Preliminary Claimant to the Respondents.

Still held as of December 12, 2023, the Recognized Loss per NFT is the

purchase/acquisition price of the Stoner Cats NFT minus $92.93, the average sale

price of the Security during the Lookback Period.

If the Recognized Loss per NFT calculates to a negative number, reflecting a gain, the

Recognized Loss per NFT will be $0.00.

II.

Additional Provisions

Acquisitions

The receipt or grant of the Security by gift, devise, inheritance, or operation of law will not

be considered an eligible purchase if the original purchase did not occur in the Offering. Stoner Cats

NFTs acquired after the Offering will be excluded from the calculation of the Recognized Loss.

III.

Calculating Recognized Loss

Recognized Loss will be the sum of the Recognized Loss per NFT, as calculated above, on

all Stoner Cats NFTs purchased or acquired by the Preliminary Claimant in the Offering. If the

Recognized Loss calculates to a negative number, reflecting a gain, then the Recognized Loss will

be $0.00.

Recognized Loss may be limited to actual market loss. If a Preliminary Claimant’s actual

market loss on all Stoner Cats NFTs purchased/acquired in the Offering is less than his, her or its

Recognized Loss, then the Recognized Loss shall be limited to the actual market loss amount. If the

actual market loss calculates to a gain, then the Recognized Loss will be $0.00.

The actual market loss will be calculated as (a) the total purchase amount for Stoner Cats

NFTs purchased/acquired in the Offering plus the royalties paid (if any) by the Preliminary Claimant

to the Respondents, less the sum of (b) the sales proceeds (before payment of any royalties or fees to

the trading platform) from Stoner Cats NFTs purchased/acquired in the Offering and sold before the

end of the Lookback Period, and (c) the holding value on the remaining of those Stoner Cats NFTs

purchased in the Offering, which for the purposes of this calculation will be $92.93 per Stoner Cats

NFT, the average sale price of Stoner Cats NFTs during the Lookback Period.

IV.

Becoming An Eligible Claimant

A Preliminary Claimant, who is not an Excluded Party, who submits a valid Claim Form and

has suffered a Recognized Loss, as calculated above, will be deemed an Eligible Claimant.

Calculated by staff economists using data from EtherScan.io.

Allocation of Funds

If the Net Available Fair Fund is equal to or exceeds the sum of Recognized Losses of all

Eligible Claimants, each Eligible Claimant’s distribution amount will equal his, her, or its

Recognized Loss, plus any “Reasonable Interest” awarded. If the Net Available Fair Fund is less

than the sum of the Recognized Losses of all Eligible Claimants, each Eligible Claimant’s

distribution amount will equal his, her or its “Pro-Rata Percentage” of the Net Available Fair Fund.

In either case, the distribution amount will be subject to the “Offset for Prior Recovery” and

“Minimum Distribution Amount.”

Calculating an Eligible Claimant’s Pro-Rata Percentage

This computation is intended to measure Eligible Claimants’ Recognized Losses against one

another. Each Eligible Claimant’s Pro-Rata Percentage will be calculated as the ratio of his, her, or

its Recognized Loss to the sum of Recognized Losses of all Eligible Claimants.

Offset for Prior Recovery

To avoid payment of a windfall, an Eligible Claimant’s distribution amount will be no larger

than his, her, or its Recognized Loss minus the amount of any compensation for the loss that resulted

from the conduct described in the Order that was received from another source (e.g., class action

settlement), to the extent known by the Fund Administrator (“Prior Recovery”), plus any Reasonable

Interest awarded. That is, the distribution amount will be capped at the Recognized Loss less the

Prior Recovery, plus any Reasonable Interest awarded.

Reasonable Interest

If the Net Available Fair Fund exceeds the amount necessary to pay all Eligible Claimants their

Recognized Loss (minus any Prior Recovery) in full, the Fund Administrator, in consultation with the

Commission staff, may include interest in the distribution amount to compensate for the time value of

money. Reasonable Interest will be calculated using the Short-term Applicable Federal Rate plus three

percent (3%), compounded quarterly from September 13, 2023 (the date the Order was issued) through the

approximate date of the disbursement of the funds. If there are insufficient funds to pay Reasonable

Interest in full to all Eligible Claimants, Reasonable Interest will be awarded on a pro-rata basis from the

excess funds.

Minimum Distribution Amount

The Minimum Distribution Amount will be $20.00. An Eligible Claimant whose distribution

amount is less than the Minimum Distribution Amount will be deemed ineligible and his, her, or its

distribution amount may be reallocated on a pro-rata basis to Eligible Claimants whose distribution

amounts are greater than or equal to the Minimum Distribution Amount.

Payee and Distribution Payment

An Eligible Claimant whose distribution amount equals or exceeds the Minimum

Distribution Amount will be deemed a Payee, and will receive a Distribution Payment equal to his,

her, or its calculated distribution amount.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.