The Bored Ape Yacht Club’s (BAYC) backbone Yuga Labs to face a potential class-action suit for “inappropriately inducing” investors to buy financial products created by Yuga Labs namely the Ape Coin and the Bored Ape Yacht Club NFTs.
Law firm Scott+Scott is planning a class-action suit against Yuga Labs claiming Yuga promised enormous returns on investment to “unsuspecting investors.”
Scott+Scott also noted that Yuga utilized celebrity endorsers and promoters to artificially inflate the price of the company’s NFTs and tokens.
The plaintiffs in the case have not yet submitted a formal complaint to a federal court. Scott+Scott is still looking for petitioners who sustained losses in connection with the acquisition of Yuga-backed NFTs and tokens between April and June.
The claim in the lawsuit is that Yuga misrepresented Bored Ape NFTs and ApeCoin as securities with assured returns when in fact they have lost value over the past three months.
APE token rose to a record high of $26.70 before falling roughly 82.5% to $4.66 at the end of June, while the floor price of NFTs decreased from 151.5 ETH to 92.9 ETH.
The court’s decision on whether NFTs are securities will be crucial to the suit’s success once it is filed.
If the court decides that the BAYC NFTs qualify as securities, Yuga Labs then have violated the disclosure and registration requirements that comes along with offering securities.
The SEC has not formally classified any NFT as security yet, which may be due to the fact that the SEC has long resisted bringing the broader art market under its jurisdiction.
If the lawsuit is eventually filed, Scott+Scott will need to demonstrate that Yuga Labs and its celebrity promoters failed to disclose their paid advertisements, as required by law.
The SEC may finally decide whether it considers NFTs, or even governance tokens like ApeCoin, to be securities as a result of this lawsuit against Yuga.
This crypto winter is probably a lawsuit season for Yuga Labs it seems. Last month, Yuga Labs filed a lawsuit against Ryder Ripps, a conceptual artist. Ryder Ripps is charged by Yuga Labs for “seeking to devalue” authentic BAYC NFTs with a counterfeit collection dubbed RR/BAYC NFTs.
A few days before that Yuga Labs filed a trademark complaint against the initial Otherside NFT creator. The team requested the creator Alberto Herrera that he erase all references to the Otherside from his website.
Will the SEC finally acknowledge NFTs as securities? Will Yuga Labs’ projects succumb to the bear market? Let’s see how all of this will unfold in the future.
