Yuga Labs, the $4 billion company behind the Bored Ape Yacht Club (BAYC) NFT collection, could be sued as a class by investors who say the company unfairly raised the prices of its crypto assets, causing them to lose a lot of money.
Legal firm Scott+Scott says that investors were “improperly encouraged” to buy the company’s NFTs (non-fungible tokens) and ApeCoin (the company’s native currency).
Lawyers say that Yuga Labs used celebrity marketers and sponsorships to “inflate” the price of its NFTs by promising unrealistically high returns.
Celebrities like musician Snoop Dogg, football player Tom Brady, and social influencer Paris Hilton, among others, own and support the BAYC line. The most expensive piece of digital art by BAYC was sold for $3.4 million at the end of last year.
As a result of the broader financial market crisis, the prices of crypto assets and NFTs have been going down recently. NFT Stats says that the average price of a BAYC NFT that was sold in the past week was $115,000. This is down from about $425,000 three months ago.
Along with its successful BAYC NFTs, Yuga Labs released ApeCoin on the Ethereum blockchain in March so that it could power its upcoming metaverse environment.
But Scott+Scott didn’t like the company’s decision to make a coin for the community. “After selling off millions of dollars in NFTs that were falsely marketed, Yuga Labs made ApeCoin to trick investors again,” the lawyers said.
“Once it was found that the claimed growth was completely based on continuing advertising (rather than real use or underlying technology),” they wrote, “retail investors were left with tokens that had lost more than 87% of their value since the inflated price peak on April 28, 2022.”
ApeCoin started trading on March 17 at $8.15. It can be bought and sold on Coinbase, Binance, and Kraken, which are all big exchanges. On April 28, the token hit its all-time high of $26.70, which was a 200 percent increase from the day before. Stats from CoinGecko show that it has since dropped by more than 75%, to $6.30 as of Monday at 4:40 a.m. ET.
There would be hundreds of other cryptocurrency class actions along with the one against Yuga Labs.
Scott+Scott says that investors who lost money on investments related to Yuga Labs between April and June of this year are being asked to join a possible class action.
Ryder Ripps, a critic who uses a fake name and is being sued by Yuga Labs for trademark infringement in a separate case, said he thinks there will be more lawsuits.
Others criticized the law firm for suing Yuga Labs. One person said the investors “don’t know how to hold.”
Formal action hasn’t been taken yet, but Scott+Scott would have to show that investors didn’t know about the risks or didn’t know that celebrities were getting paid to promote the NFTs they owned.
Scott+Scott has offices in New York, London, Amsterdam, and Berlin, as well as in the United States. If the firm’s complaint was made official, it would join the growing number of lawsuits against bitcoin businesses.
Bloomberg Law says that as of March, there were more than 200 class action lawsuits and other private lawsuits about the cryptocurrency business. Binance, Solana Labs, and KuCoin were among the companies that were sued.
At the time of publication, Yuga Labs had not replied to Blockworks’ request for a comment.