In a new lawsuit, a dozen celebrities are accused of causing significant financial losses by promoting non-fungible tokens, or NFTs.
Celebrity ventures into the cryptocurrency world are quickly becoming a nightmare.
A new class action lawsuit regarding non-fungible tokens, or NFTs, has just been filed against a dozen famous people. This follows lawsuits against billionaire Mark Cuban, insolvent cryptocurrency lender Voyager Digital, Tom Brady, Steph Curry, Naomi Osaka, Gisele Bundchen, Larry David, and others in the bankruptcy of cryptocurrency exchange FTX.
The celebrities’ endorsements of the incredibly exclusive Bored Ape Yacht Club (BAYC) NFTs and the ApeCoin token are the subject of this complaint. The plaintiffs claim that the BAYC was a “scheme,” which resulted in their suffering sizable financial losses after they invested in the NFTs and ApeCoin, the company’s cryptocurrency.
Plaintiffs Adam Titcher of California and Adonis Real of Florida claim that between April 2021 and the present, they purchased assets related to BAYC and experienced significant financial losses. According to both plaintiffs, they bought these assets after relying on “misleading promotions” from Yuga Labs and several well-known people.
Exclusiveness
According to the lawsuit, BAYC “heavily rely on the perception that ‘joining the club’… brings investors status and grants them access to events, benefits, and other lucrative investment opportunities exclusively to BAYC holders.”
The plaintiffs asserted that “the exclusivity of BAYC membership was entirely based on the inclusion and endorsements of highly influential celebrities.
Yuga Labs’ Bored Ape Yacht Club is an NFT collection of 10,000 simian avatars. Celebrities like Eminem, Jimmy Fallon, and Paris Hilton all have unique apes of their own. The cryptocurrency-related company Yuga Labs provides investors with a range of digital assets, including different NFT collections and the business’s own ApeCoin token. Yuga’s flagship NFT line is under the name BAYC.
For instance, according to the lawsuit, Adam Titcher purchased Mutant Ape Yacht Club #1984 for 5.3 ETH, or about $17,000 at the time, in August 2021.
But like most crypto assets, the value of these assets has dropped significantly over the past few months due to a very challenging time. The “crypto winter” refers to this extended period of price decline.
ApeCoin has lost almost 84% of its value since reaching its all-time high on April 24. The cost of NFTs has also significantly decreased since the peak of the NFT craze in early 2022 in 2021.
According to the complaint, the defendants “used celebrities to attract unsuspecting investors and made false and misleading statements regarding Yuga’s growth prospects, financial ownership, and financial benefits for Yuga securities investors in order for Yuga insiders to sell the unregistered Yuga securities in violation of the Securities Act.”
‘Securities’
Surprisingly, the complaint refers to NFTs as “security.” This information is crucial because Yuga Labs has been under investigation by the U.S. Securities and Exchange Commission (SEC) since March to see if it is breaking any laws when it sells its assets. The regulator must first decide whether the assets offered by Yuga Labs are “securities” before being able to respond. If this is the case, the company should have adhered to specific rules, particularly those pertaining to investor information and transparency.
The lawsuit was submitted by Scott+Scott Attorneys at Law LLP to the Central District of California U.S. District Court. There are roughly 40 defendants total, who have been broken down into subgroups.
Madonna, Paris Hilton, James Fallon, Snoop Dogg, Universal Television, Justin Bieber, Gwyneth Paltrow, Serena Williams, Post Malone, Diplo, Future, Kevin Hart, Stephen Curry, The Weeknd, DJ Khaled, NFT artist and star Beeple, and Adidas are among the defendants in the promoter lawsuit.
The CEO defendants are Alexis Ohanian, an investor, and co-founder of Reddit, as well as Amy Wu, Maaria Bajwa, and Dean Steinbeck, who serve on the board of Ape DAO.
As defendants, Web3 investor Guy Oseary, MoonPay, and Yuga Labs are included. The three are charged with organizing a “vast scheme” to con investors.
This is not the first complaint from the law firm Scott+Scott about celebrities endorsing cryptocurrencies. The same attorneys are behind the class action lawsuit that was brought against Floyd Mayweather, Kim Kardashian, and others for allegedly using social media to promote the now-defunct cryptocurrency EthereumMax.
On December 9, a federal judge in California rejected the EthereumMax lawsuit, saying that investors needed to act responsibly before basing their bets on the zeitgeist of the moment.
