CDS Metaverse P2E Lawsuit Alleges Misleading Promotion and Price Manipulation in Bored Ape Yacht Club NFT Auction
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Lawsuit Alleges Misleading Promotion and Price Manipulation in Bored Ape Yacht Club NFT Auction

Investors are taking legal action against Sotheby's Holdings Inc. and other parties in connection with a 2021 auction and promotion of Bored Ape Yacht Club non-fungible tokens (NFTs), following a significant drop in prices for these celebrity-endorsed digital collectibles.

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Lawsuit Alleges Misleading Promotion and Price Manipulation in Bored Ape Yacht Club NFT Auction

Lawsuit Alleges Misleading Promotion and Price Manipulation in Bored Ape Yacht Club NFT Auction

Investors are taking legal action against Sotheby’s Holdings Inc. and other parties in connection with a 2021 auction and promotion of Bored Ape Yacht Club non-fungible tokens (NFTs), following a significant drop in prices for these celebrity-endorsed digital collectibles.

The class action lawsuit, brought forward by four named plaintiffs, claims that Sotheby’s and creator Yuga Labs collaborated to inflate the NFT prices artificially and engaged in misleading promotion of the NFTs.

Among the 30 defendants named in the lawsuit is Sotheby’s, while celebrities like Justin Bieber and Paris Hilton are accused of promoting the NFT collection without disclosing their financial ties to it.

According to cryptocurrency market tracker CoinGecko, the NFTs featuring colorful digital illustrations of apes are now selling for as low as $52,445, a stark decline from the prices seen in May 2022, when the cheapest NFTs were valued at over $400,000.

Lawsuit Alleges Misleading Promotion and Price Manipulation in Bored Ape Yacht Club NFT Auction
Lawsuit Alleges Misleading Promotion and Price Manipulation in Bored Ape Yacht Club NFT Auction 1

In September 2021, Sotheby’s sold over 100 of these NFTs to a single buyer in an online auction, fetching more than $24 million, surpassing the estimated pre-sale range of $12 million to $18 million.

The amended lawsuit, which initially did not name Sotheby’s as a defendant when filed in December, alleges that the auction was “deceptive” and that the auction house was hired by Yuga Labs to generate interest and excitement around the Bored Ape brand.

The plaintiffs’ legal team added in a recent complaint filed in a California federal court, “Sotheby’s representations that the undisclosed buyer was a ‘traditional’ collector had misleadingly created the impression that the market for (Bored Ape Yacht Club) NFTs had crossed over to a mainstream audience.”

Sotheby’s responded to the allegations in an emailed statement to CNN, stating that the claims in the lawsuit are groundless and that they are fully prepared to defend themselves.

Representatives for celebrities Paris Hilton and Justin Bieber, who are accused of promoting the NFTs for personal financial gain, have not provided comments to CNN on the matter.

Yuga Labs, the creator of the NFTs, expressed via email that they consider the allegations baseless and lacking factual basis, both in the recent iteration of the lawsuit and the prior one. They emphasized their role as a media and technology company that has empowered communities of enthusiasts and entrepreneurs to create innovative projects.

The investors involved, who Yuga Labs’ spokesperson referred to as “alleged purchasers of our products,” are seeking a jury trial and over $5 million in damages.

NFT Market Decline and Legal Context

NFTs, which transform digital artworks and collectibles into verifiable, unique assets traded on blockchains, experienced a surge in prices during 2021. However, the market has since seen a decline, paralleling the broader cryptocurrency space.

The Bored Ape Yacht Club, consisting of 10,000 NFTs on the Ethereum blockchain, was launched in April 2021. These NFTs showcase cartoon apes with various digitally generated attributes and accessories.

The lawsuit targets not only Yuga Labs but also other entities involved in promoting the NFTs, such as Adidas and MoonPay, alleging a conspiracy to artificially inflate prices. The suit claims that Yuga Labs utilized MoonPay to discreetly compensate celebrities promoting the NFTs and make the interest appear organic rather than paid promotion.

The lawsuit is part of a larger trend of legal cases in the cryptocurrency sector, and it comes at a time when increased scrutiny is being directed toward the industry by regulators.

The celebrity endorsements associated with Bored Ape Yacht Club played a role in drawing new participants into the cryptocurrency world, an industry susceptible to manipulation and fraudulent activity. Regulatory authorities, including the Securities and Exchange Commission (SEC), have been taking actions to enforce transparency in cryptocurrency endorsements.

Lawsuit Alleges Misleading Promotion and Price Manipulation in Bored Ape Yacht Club NFT Auction
Sources:CNN

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