BAYC creator facing lawsuit for 'fraudulently promoting' NFTs

These accusations do not only concern NFTs from the BAYC collection, but also ApeCoin, a cryptocurrency for owners of these famous NFTs. — Photo by Tingey Injury Law Firm on Unsplash

Yuga Labs, creator of the Bored Ape Yacht Club non-fungible tokens, is facing the wrath of several investors who feel they have been cheated after the crypto market and NFT prices plunged. A US law firm is now considering filing a class-action lawsuit against the company.

Could Bored Ape Yacht Club (BAYC) soon to be the subject of a lawsuit? The law firm Scott+Scott is proposing to file a class action lawsuit against the company, claiming on its website that "Yuga Labs investors were inappropriately induced to buy financial products created by Yuga Labs, namely the Ape Coin and the Bored Ape Yacht Club non-fungible tokens ('NFTs')."

The BAYC NFT collection, depicting cartoon monkeys, was launched in April 2021 when the cryptocurrency market was booming. Quickly, this collection met with huge success, becoming one of the most high-profile NFT projects in the industry. But lately, cryptocurrencies have been experiencing a sharp depreciation that is reflected in the value of such investments.

"Yuga Labs leadership used celebrity promoters and endorsements to inflate the price of the company's NFTs and token," the law firm continues, accusing the BAYC creator of talking up the potential growth prospects and returns on investment to "unsuspecting investors."

Putting NFTs in the spotlight of regulation?

These accusations do not only concern NFTs from the BAYC collection, but also ApeCoin, a cryptocurrency for owners of these famous NFTs. The latter reached its record high of US$26 (RM115.95) in April, before crashing down by more than 80% of its value. Indeed, NFT prices are experiencing downward pressure on two fronts - first from the exchange currency Ethereum, but also from the cooling interest of investors, who are becoming more wary of spending large sums on these monkey avatars (and their various associated benefits).

As a result of this drop, "retail investors were left with tokens that had lost over 87% from the inflated price high on April 28, 2022," explains Scott+Scott.

For now, the law firm is calling for testimonials from disappointed investors in anticipation of filing a class-action lawsuit against Yuga Labs. If the case goes to trial, the focus will largely fall on the subject of NFTs, with the recognition of non-fungible tokens as securities at the heart of the debate. For the moment, the US Securities and Exchange Commission has still not classified these assets as financial securities.

Meanwhile, legal cases are stacking up for Yuga Labs. Last month, the company filed a lawsuit against Ryder Ripps, an artist it accuses of "seeking to devalue" its brand with counterfeit collections. It has also filed a trademark complaint against the original creator of the "Otherside" NFTs, Alberto Herrera. – AFP Relaxnews

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