Last June, Yuga Labs sued a prominent artist for trademark infringement, but as July closes, they may find themselves on the receiving end of similar circumstances.
The $4 billion startup behind the successful Bored Ape Yacht Club NFT collection could face a class action suit that accuses them of artificially boosting the price of crypto assets – a move that leaves investors with deep losses.
The case
Scott + Scott, a law firm, announced that it is organizing a class-action suit against Yuga Labs.
The lawsuit alleges that the company falsely promoted the BAYC NFTs and ApeCoin, the collection’s native Ethereum token, as securities with guaranteed returns.
However, they plummeted in value in the last three months.
The plaintiffs are yet to file an official complaint in a federal court, and Scott + Scott is currently in the preliminary stage of seeking plaintiffs who suffered losses related to Yuga-backed NFTs and tokens from April to June.
Other allegations
Lawyers also claim that Yuga Labs deployed celebrity promoters and endorsements to “inflate” its NFT prices by overpromising high returns.
Read also: Bored Ape Yacht Club Co-Founder Addresses Accusations of the Collection Hiding Nazi Imagery
Among the celebrities that endorsed the BAYC collection are Snoop Dogg, Tom Brady, and Paris Hilton, to name a few.
Scott + Scott
The law firm is calling on individual investors who suffered losses from their Yuga Labs-related investments in mid-2022 to join a potential class action.
Ryder Ripps, a pseudonymous critic, expects more lawsuits to follow.
Meanwhile, others have criticized the firm for moving to take up a case against Yuga Labs.
Sales
Last year, a BAYC digital artwork sold for a staggering $3.4 million.
However, things have changed as crypto assets and NFT prices declined amid the broader financial market downturn.
According to NFT Stats data, the average price of a BAYC NFT sold in the past seven days is $115,000, a significant drop from $425,000 three months ago.
Read also: Bored Ape Yacht Club Falls Victim to Hack Agains, Losing $260,000
ApeCoin
Yuga Labs also launched ApeCoin in March through the Ethereum blockchain, which would serve as its power to the upcoming Metaverse ecosystem.
Despite their move, Scott + Scott slammed Yuga for introducing a community-focused token, saying:
“After selling off millions of dollars of fraudulently promoted NFTs, Yuga Labs launched ApeCoin to further fleece investors.
“Once it was revealed that the touted growth was entirely dependent on continued promotion (as opposed to actual utility or underlying technology), retail investors were left with tokens that had lost over 87% from the inflated price high on April 28, 2022.”
ApeCoin was later listed on major coin exchanges and opened trade at $8.15 on March 17.
The token hit an all-time high a month later, pricing at $26.70 – a 200% surge.
Key factor to winning the case
Once the case is filed, the court’s determination on whether NFTs are securities and their similarities to a company share would be a key factor to winning.
If the court finds BAYC NFTs to be securities, then Yuga Labs will have failed in making the necessary disclosure and registration obligations that accompany offering securities.
However, it will take a lucky shot.
“I see very, very, very little likelihood that the SEC is going to want to step in there and… characterize that [Bored Ape NFT collection] as a security,” said professor of law at the University of Kentucky Brian Fyre.
“I think they’re going to resist that tooth and nail, because that would open a huge can of worms for them and force them to regulate all manner of other things that they don’t want to be regulating.”
References:
Yuga Labs faces potential class action lawsuit over ‘inflated’ BAYC NFTs
