Image source: Coinquora
Last June, Yuga Labs sued a prominent artist for trademark infringement, but as August approaches, they could be victims of similar circumstances.
The $4 billion startup behind Bored Ape Yacht Club NFT’s successful collection could face a class action lawsuit accusing it of artificially raising the price of cryptocurrencies, a move that leaves investors with huge losses.
Scott + Scott, a law firm, announced filing a class action lawsuit against Yuga Labs.
The lawsuit alleges that the company falsely promoted the NFTs BAYC and ApeCoin, the original Ethereum token in the collection, as guaranteed return securities.
However, over the past three months, they have declined in value. The plaintiffs have yet to file an official complaint with the federal court.
Scott + Scott is currently in the preparatory stage of finding plaintiffs who suffered Yuga-backed NFT and token-related losses from April to June.
Lawyers also claim that Yuga Labs has used celebrity promoters and sponsorships to “inflate” its NFT prices by promising excessively high returns.
Among the celebrities who sponsored the BAYC collection are Snoop Dogg, Tom Brady and Paris Hilton, just to name a few.
Read also: Yuga Labs Co-Founder Clears the Air Regarding Nazi Accusations in the Bored Ape Yacht Club Collection
Scott + Scott
The law firm is asking individual investors who suffered losses on their Yuga Labs-related investments in mid-2022 to participate in a potential class action.
Ryder Ripps, a pseudonymous critic, expects other causes to follow. Meanwhile, others have criticized the company for wanting to sue Yuga Labs.
Last year, a digital artwork from the BAYC collection sold for a whopping $3.4 million.
However, as cryptocurrencies and NFT prices declined during the broader financial market downturn, things have changed.
According to data from NFT Stats, the average price of a BAYC NFT sold over the past seven days is $ 115,000, a significant drop from $ 425,000 three months ago.
Read also: Yuga Lab’s ‘Virtual’ Land Bonanza Makes History as the Biggest NFT Mint
Yuga Labs also launched ApeCoin in March via the Ethereum blockchain, which would serve as the powerhouse for the upcoming Metaverse ecosystem.
Despite their move, Scott + Scott criticized Yuga for introducing a community-based token, saying:
“After selling off millions of dollars of fraudulently promoted NFTs, Yuga Labs launched ApeCoin to further fleece investors.
“Once it was revealed that the touted growth was entirely dependent on continued promotion (as opposed to actual utility or underlying technology), retail investors were left with tokens that had lost over 87% from the inflated price high on April 28, 2022.”
ApeCoin was subsequently listed on major coin exchanges and opened trading on March 17 at $ 8.15.
The token hit a record one month later, with a price of $ 26.70, a 200% increase.
Key factor in winning the case
Once the case is closed, the court’s decision on whether NFTs are securities and their agreements with a company’s stock would be a key factor in winning.
If the court finds BAYC’s NFTs to be securities, Yuga Labs has failed to comply with the necessary disclosure and registration obligations associated with offering securities. However, it will take a moment of happiness.
“I see very, very, very little likelihood that the SEC is going to want to step in there and… characterize that [Bored Ape NFT collection] as a security,” said professor of law at the University of Kentucky Brian Fyre.
“I think they’re going to resist that tooth and nail, because that would open a huge can of worms for them and force them to regulate all manner of other things that they don’t want to be regulating.”
Yuga Labs faces potential class action lawsuit over ‘inflated’ BAYC NFTs