The biggest lawsuits dominating the NFT space today
To say that the last few months have been complete chaos in Web3 would be a massive understatement. It’s almost as if the crypto and NFT bear market hasn’t been enough of an existential threat. With thefts, carpetbaggers and even insider trading dominating the worst of 2022’s Web3 headlines, it’s no wonder one word has grown to dangerous heights in space in recent months.
That word? Court cases. Even the threat of one has been enough to cause a stir in Web3, considering how a potential case against crypto exchange Binance flooded the headlines recently.
With so many bad apples (or alleged ones) causing damage in the space, it makes sense that there would be a high price to pay for all that misdeed. For example, FTX founder SBF has finally been arrested after his direct involvement in the crypto exchange’s public collapse. Unfortunately, it doesn’t end there. Here’s a quick summary of some of the most important lawsuits we’ve seen in the area that you need to know about.
FTX’s celebrity endorsers
Nearly a month after the fall of FTX, many Web3 investors are still reeling from the cumulative multi-billion dollar loss – and Edwin Garrison wants justice for them all. The Oklahoma resident is leading a class-action lawsuit against the many celebrities who endorsed the dethroned marketplace, including Warriors guard Steph Curry, Gisele Bündchen, Shaq and Tom Brady.
A class action occurs when one or more plaintiffs bring a lawsuit on behalf of a larger group – AKA a “class”. The settlement (minus legal fees) is shared between all members of this group. In this case, that group represents “thousands, if not millions, of consumers across the country,” according to the complaint filed in federal court in South Florida.
Garrison hopes to hold the now-bankrupt FTX liable for targeting “unsophisticated investors” via celebrity endorsements, resulting in more than $11 billion in damages. While Sam Bankman-Fried’s recent arrest may offer some small consolation to those who lost their life savings, it is a long way from getting that money back.
Yuga Labs in the hot seat
FTX was not the only company hit by a class action lawsuit in December 2022. The creator of Bored Ape Yacht Club, Yuga Labs, was named in a lawsuit filed in California that claims it used celebrity endorsers to artificially inflate the value of Apecoin, which which resulted in “swimming losses.” The named defendants in the case include Jimmy Fallon, Gwyneth Paltrow, Serena Williams, Justin Bieber, Madonna and again Steph Curry, among other celebrities who have publicly vouched for BAYC in recent times.
Central to these recent complaints is how celebrities have at times labeled advertisements for these NFT projects as mere casual endorsements. On a November 2021 episode of “The Tonight Show,” Jimmy Fallon candidly shared that he bought his first NFT — a Bored Ape — during a segment with crypto artist Beeple. One segment the lawsuit alleges was actually a paid advertisement because of Fallon’s financial stake with the parties named therein.
In response to the conspiracy alleged by the lawsuit, Yuga Labs said in a statement shared with Decrypt, “In our view, these claims are opportunistic and parasitic. We strongly believe they are without merit, and look forward to proving it.” It remains to be seen whether the claims against Yuga Labs and its seemingly endless stream of celebrity supporters hold water.
Mass friction
In November 2021, Quentin Tarantino attempted to sell pages of Pulp Fiction’s scripts as NFTs. Notably, this included a number of scenes that didn’t make it into the 1994 cult classic. If that sentence made you open a new tab in your browser and figuratively pull out your crypto wallet, we’ve got bad news for you. A few weeks after Tarantino made the announcement, Miramax sued the auteur over the planned NFT project, alleging copyright infringement due to the distributor’s legal ownership of the film’s rights – including the script.
“This group chose to recklessly, greedily and willfully disregard the agreement that Quentin signed rather than follow the clear legal and ethical approach of only communicating with Miramax about his proposed ideas,” Miramax attorney Williams wrote in his official statement . “This one-off effort devalues the NFT rights to Pulp Fictionwhich Miramax intends to maximize through a strategic, comprehensive approach.”
Fight slander
Being such a giant in the room tends to attract a lot of attention – both good and bad. Enter the months-long conflict between Ryder Ripps and Yuga Labs.
The public feud, spurred by Ripps accusing Yuga Labs of inserting problematic images into the BAYC NFT collection, came to a head when Yuga Labs finally responded to Ripps’ aggression with a lawsuit. As part of Ripps’ anti-Yuga Labs campaign, the creative director attempted to satirically “restore” the original BAYC NFT collection. This gave Yuga Labs grounds to sue Ripps for copyright infringement.
These cases are only the tip of the iceberg when it comes to the legal cases that have occurred in the NFT area in recent years. Nike v. StockX, Hermès International v. Rothschild and others continue to shape the nascent space.
