Yuga Labs faces potential class action lawsuit over ‘inflated’ BAYC NFTs

Yuga Labs, the $4 billion startup behind the Bored Ape Yacht Club (BAYC) NFT collection, may face a class-action lawsuit that claims it artificially inflated the price of cryptoassets, leaving investors with big losses.

Investors were “improperly induced” to buy the company’s NFTs (non-fungible tokens) and its native coin ApeCoin, law firm Scott+Scott wrote last Thursday.

Lawyers allege that Yuga Labs used celebrity promoters and endorsements to “inflate” the price of its NFTs by overpromising high returns.

Celebrities such as rapper Snoop Dogg, football star Tom Brady and influencer Paris Hilton, among others, own and have endorsed the BAYC collection. The most expensive BAYC digital artwork sold for $3.4 million late last year.

Recently, prices of cryptoassets and NFTs have fallen amid the broader financial market downturn. The average price of a BAYC NFT sold in the past seven days is now $115,000, according to data from NFT Stats, down from around $425,000 three months ago.

Alongside its popular BAYC NFTs, Yuga Labs launched ApeCoin in March via the Ethereum blockchain, intended to power the upcoming metaverse ecosystem.

But Scott+Scott criticized the firm’s move to introduce a community-focused token. “After selling millions of dollars of falsely promoted NFTs, Yuga Labs launched ApeCoin to further fleece investors,” lawyers said.

They added: “Once it was revealed that the assumed growth was entirely dependent on continued marketing (as opposed to actual utility or underlying technology), retail investors were left with tokens that had lost over 87% from their April 28 high, 2022.”

ApeCoin, listed on major exchanges Coinbase, Binance and Kraken, opened trading at $8.15 on March 17. The token reached an all-time high of $26.70 on April 28 – a 200% increase. It has since retreated more than 75% to $6.30 as of 4:40 a.m. ET Monday, CoinGecko data shows.

Yuga Labs’ class action lawsuit would join hundreds of other crypto lawsuits

Scott+Scott is now asking individual investors who suffered losses from their Yuga Labs-related investments between April and June of this year to participate in a potential class action.

Pseudonymous critic Ryder Ripps — who is being sued by Yuga Labs in a separate case involving trademark infringement — said he expects more lawsuits to follow.

Others criticized the law firm for wanting to file a case against Yuga Labs, with a suggests the investors “don’t know how to hold.”

An official case has yet to be filed, but Scott+Scott would have to provide evidence that investors were unaware of the risks involved, or that they did not know that celebrities were (allegedly) being paid to promote the NFTs they held.

Scott+Scott has offices across the US, as well as New York, London, Amsterdam and Berlin. If formally proposed, the firm’s lawsuit would add to an ever-growing sea of ​​legal actions being sought by cryptocurrency companies.

Bloomberg Law reported that the cryptocurrency industry had generated more than 200 class action and other private lawsuits as of March, with targets including Binance, Solana Labs and KuCoin.

Yuga Labs did not return Blockworks’ request for comment by press time.

Get today’s best crypto news and insights delivered to your inbox every night. Subscribe to Blockworks’ free newsletter now.