Joe Schneider Bloomberg News
The creator of the popular Bored Ape Yacht Club collection of NFTs and its promoters, including Madonna, Paris Hilton and Justin Bieber, have been sued by investors who claim they were duped into buying the digital collectibles by celebrities who failed to disclose that they were paid for pump sales.
Yuga Labs Inc., the blockchain startup behind Bored Ape Yacht Club, Hollywood agent Guy Oseary and MoonPay USA LLC, a company controlled by Oseary, were accused in the proposed class action of exploiting their network of A-list musicians, athletes and celebrities for to market and sell Yuga financial products in a deceptive manner.
“The advertising campaign was very successful, generating billions of dollars in sales and resales,” the investors said in the complaint filed Friday in Los Angeles federal court. “The manufactured celebrity endorsements and misleading campaigns regarding the launch of an entire BAYC ecosystem (the so-called Otherside metaverse) were able to artificially increase interest in and the price of the BAYC NFTs during the relevant period, prompting investors to purchase these losing investments at drastically high prices.”
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It is the latest lawsuit to target celebrities for their advertising of digital financial products. At least three investor lawsuits were filed after the implosion of FTX, targeting celebrities including Tom Brady and Stephen Curry for promoting the failed crypto exchange. Curry was sued by the BAYC investors, as were Gwyneth Paltrow, Kevin Hart and Serena Williams, among others.
The US Securities and Exchange Commission is investigating Yuga Labs on whether the sale of its digital assets violates federal law and whether certain non-fungible tokens from the Miami-based company are more akin to stocks and should follow the same disclosure rules, Bloomberg reported in October.
“These claims are opportunistic and parasitic,” Yuga Labs said in an emailed statement, referring to the BAYC lawsuit. “We strongly believe they are without merit, and look forward to proving as much.”
Oseary, who also represents Madonna, did not immediately respond to a request for comment.
At least one crypto campaign lawsuit has failed.
Kim Kardashian and Floyd Mayweather Jr. were sued in Los Angeles over their promotion of the EthereumMax token, but Judge Michael W. Fitzgerald threw out the complaint on December 8, ruling that the investors failed to allege facts showing they paid more than fair market value for their EMAX tokens when they bought them.
Kardashian agreed to pay $1.26 million to settle SEC claims related to the campaigns.
Also named in the BAYC complaint is FTX’s former head of commercial initiatives Amy Wu, who served on the board of Ape DAO and served as a consultant and spokesperson for the company.
“Wu used his connections at crypto exchange FTX to recruit world champion athlete Curry to solicit the sale of the BAYC collection of NFTs,” the investors alleged. “None of these celebrity endorsements of BAYC NFTs disclosed the underlying financial interests and relationships involved.”
The BAYC investors cite a number of promotions they claim were misleading in the 94-page complaint, including Hilton’s appearance on the Jimmy Fallon show on NBC, where both touted BAYC NFTs, and Hilton’s follow-up Twitter posts. Fallon is also a defendant in the case.
Allison Rawlings, a spokeswoman for NBCUniversal, said the company does not comment on legal matters.
The Twitter posts “gave investors the false impression that Hilton: (1) actually bought BAYC NFT; and (2) was enthusiastically ‘hanging out in the metaverse’ with Fallon and that they were ‘BoredApeBesties,'” the investors allege in the complaint. truth, Hilton was only promoting BAYC NTFs and MoonPay because she was financially motivated to make these statements.”
Madonna was accused of giving a false impression in a newspaper article that quoted her saying she was upset at being outbid for a Bored Ape NFT.
Madonna’s “statements about her inability to obtain BAYC NFTs, which were her first choice, misleadingly suggested to investors that the Yuga papers were so sought after and so exclusive that even a highly connected celebrity” like her could not get any that she wished.
The investors are seeking unspecified financial compensation.
