Bored Ape NFT Holders File Suits Against Backers

Investors are suing celebrity backers of Bored Ape non-fungible tokens (NFT), claiming they were misled.

The recent crypto cooldown has left a number of retail investors angry and feeling cheated by the premise, promising that their once high-flying digital holdings will only increase.

A lawsuit filed in Los Angeles accuses Yuga Labs, the $4 billion company behind popular NFT aggregators Bored Ape Yacht Club (BAYC), CryptoPunks and Meebits — as well as a Metaverse “first mover” — of leveraging celebrity endorsements to pump up sales without to allow the celebrities to disclose their financial relationship with the company.

The class-action lawsuit that accompanies it reads like a late-night guest wish list.

Diplo, DJ Khaled, The Weeknd, Madonna, Paris Hilton, Justin Bieber, Post Malone, Snoop Dogg, Jimmy Fallon, Kevin Hart and more are all named as defendants under their legal names. So are heavyweights like Steph Curry, Gwyneth Paltrow, Serena Williams and her husband, Reddit founder and venture capital investor Alexis Ohanian. Companies such as Universal Television and Adidas are also included.

A viral video clip from last year when Paris Hilton and Jimmy Fallon compared their “Monkeys” on network television, has resurfaced as evidence of public promotion of investments without warning of risk or suitability.

Jimmy & @Parishilton compare #Boredapeyc NFTS. #FallonTonight pic.twitter.com/RoOlhteLnN

— The Tonight Show (@FallonTonight) 25 January 2022

“In our view, these claims are opportunistic and parasitic,” a Yuga Labs spokesperson told PYMNTS in an email. “We strongly believe they are without merit and look forward to proving as much.”

Marketing Handbook

For as long as celebrities have been approached by companies for marketing, there has been debate about the validity of their endorsements. This is why it is so important to disclose underlying or existing financial conditions.

That is also why it is always recommended for consumers to do background work before investing their hard earned money.

As a still nascent industry, crypto was able to penetrate the mainstream by leveraging a parade of celebrity endorsements and spokespeople. However, it wasn’t always sunshine and roses for the celebrities involved, and some were widely ridiculed for their participation.

To be sure, celebrities make big and common targets for lawyers. Most tend to be as wealthy as they are popular, and the need to control and manage their public image may make them more likely to settle the lawsuits against them.

The 95-page class action lawsuit against Yuga Labs and its celebrity roster calls for a jury trial in Los Angeles.

FTX connection

Yuga Labs is not alone in its legal troubles. Celebrities who backed the collapsed cryptocurrency exchange FTX are similarly being sued for unrealistically hyping up the value of digital assets.

Defendants on this front include, among others, Larry David, Steph Curry, Tom Brady and his ex-wife, Gisele Bündchen.

FTX has since been charged as a multi-year fraudulent exercise designed to steal billions of customer funds on a massive scale.

FTX was an investor in Yuga Labs’ $450 million fundraising. The collapsed exchange’s former head of commercial initiatives, Amy Wu, now works for Yuga Labs and is named as a defendant in the lawsuit against the company for her role in recruiting the NBA’s Curry as a representative.

Celebrities were not enough for FTX. The exchange also donated heavily to politicians, using tens of millions of dollars of customer money in an effort to influence regulators and lawmakers. Bankruptcy attorneys overseeing the liquidation of FTX may reportedly try to recover those funds, all $73 million of them.

False impressions

At the heart of the lawsuits, and in a way at the heart of crypto, is that without disclosing the full extent of the financial incentives behind their behavior, public figures were able to lure investors into buying what ended up losing investments with heavy bloating. Prices.

Of course, consumers are responsible for their own financial decisions. But the playing field must be fair, and the available information complete, for them to be able to make the right choices.

It has been both fascinating and unnerving to witness the boom-bust cycle within the crypto and NFT marketplaces and how quickly confidence can ebb and flow. The ability of fast-growing companies, or NFT collections, to capture the public imagination in an instant and emerge from nowhere as robust, established institutions will likely take their place in the annals of investment history.

For now, before this chapter is written, the focus remains on cleanup and blame, and many issues for courts and regulators to consider.

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