A group of investors have taken to suing the top auction house Sotheby’s Holdings Inc. for “misleadingly” promoting Bored Ape Yacht Club non-fungible tokens (NFTs) in a 2021 auction.
The lawsuit has also named celebrities like Justin Bieber and Paris Hilton, who are among the 30 defendants being accused of promoting the NFT collection without disclosing their financial links to it. The latter has been accused of having “feigned interest” in the NFTs for financial gain.
Filed against the Bored Ape’s creator, the lawsuit has targeted several other companies involved in promoting the NFTs. This includes sportswear giant Adidas, claiming they conspired in a “vast scheme” to artificially inflate prices of these tokens.
Similarly, crypto payments company MoonPay has also been accused of market manipulation. It has been alleged that Yuga Labs used MoonPay to “discreetly pay their celebrity cohorts”. This was said to make interest in the NFTs “appear to be organic” rather than the result of a paid promotion, stated the lawsuit.
Over the last one year, these celebrity-endorsed collectibles have lost significantly in price. It all goes back to the September 2021 auction where Sotheby’s sold 107 NFTs to a single buyer in an online auction. These went out for more than $24million, whereas the estimated pre-sale was only around $12m to $18m.
The latest lawsuit claimed that this sale was “deceptive” and that Sotheby’s had been hired by blockchain company Yuga Labs to “generate investors’ interest and hype around the Bored Ape brand”. The now-amended lawsuit had not mentioned the auction house as a defendant when it was originally filed back in December 2021.
While filing a complaint in a federal court earlier this month, the plaintiffs’ legal team said: “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.”
The auction house has repudiated the allegations saying they were “baseless”. “Sotheby’s is prepared to vigorously defend itself”, said the fine arts company in a statement to CNN.
A spokesperson for the digital asset and blockchain technology company Yuga Labs responded to the lawsuit saying: “We believe that these new allegations, like those in the previous iteration of this opportunistic complaint, are completely without merit or factual basis…..As a media and technology company, Yuga Labs has empowered strong communities of enthusiasts and entrepreneurs to innovate, connect, and build. Their creativity has fostered community-driven projects that have captured the imagination of people around the world. That’s the story worth telling.”
The spokesperson also called the plaintiffs as “alleged purchasers of our products” instead of being true investors. The class action lawsuit filed by the four plaintiffs have called for a jury trial and have requested more than $5m in damages.
The NFT frenzy, which was quite high in the last two years, has significantly calmed down lately. The Bored Ape Yacht Club, which is a collection of 10,000 NFTs hosted on the Ethereum blockchain, has been amongst the highly-sought after tokens in the market.
One of the top colourful digital illustrations of these apes was sold for a towering sum of $3.4m back in 2022. Now, these NFTs can be bought for as little as $52,445, as per cryptocurrency market tracker CoinGecko.