12/12/2022 Bieber, Madonna Among Dozens of Celebs Named in Lawsuit Alleging Yuga Labs NFT 'Scheme'

The suit claims celebrity endorsements of Bored Ape Yacht Club NFTs and ApeCoin tokens resulted in financial loss for investors. Yuga Labs called the allegations "opportunistic and parasitic."

CDCROP: Bored Ape Yacht Club NFT image (Yuga Labs, Modified by CoinDesk)

Bored Ape Yacht Club NFT image (Yuga Labs, modified by CoinDesk))

A number of celebrities, including Justin Beiber, Paris Hilton, Jimmy Fallon and Madonna, among others, were named as plaintiffs in a class-action lawsuit, alleging thatYuga Labsnon-fungible tokens (NFT) collections were "misleadingly promoted" and resulted in financial damage to the defendants.

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The lawsuit, filed by John T. Jasnoch of Scott+Scott Attorneys at Law LLP in U.S. District Court for the Central District of California on Thursday, was brought forward on behalf of "investors" who purchased Yuga Labs NFTs including Bored Ape Yacht Club (BAYC) orApeCoin– the Ethereum-based governance and utility tokens used within the APE ecosystem – between April 2021 and the present. The two plaintiffs, Adam Titcher of California and Adonis Real of Florida, purchased Yuga Labs assets during that time.

Titcher purchasedMutant Ape Yacht Club #1984in August 2021 for 5.3 ETH (about $17,000 at the time) and mintedOtherdeed for Otherside #16235on OpenSea in April, while Adonis purchased an undisclosed amount of ApeCoin on Coinbase. According to the filing, both men purchased the assets "in reliance on the misleading promotions" from Yuga Labs and a number of celebrities, resulting in "investment losses."

The 95-page filing repeatedly refers to NFTs as securities, a question the U.S. Securities and Exchange Commission hasreportedly been investigating since March. In October, Bloomberg reported that theSEC was probing Yuga Labsto determine if sales of its digital assets violate federal law.

The suit also alleges that Yuga Labs and Web3 investor Guy Oseary were involved in a "vast scheme" and used crypto payments platform MoonPay as a "front operation" to promote and sell digital assets. "The executives at Yuga and Oseary together devised a plan to leverage their vast network of A-list musicians, athletes, and celebrity clients and associates to misleadingly promote and sell the Yuga Financial Products," the lawsuit reads.

In total, the lawsuit names 37 defendants, including the founders and leadership team at Yuga Labs; MoonPay and its CEO, Ivan Soto-Wright; Reddit co-founder and investor Alexis Ohanian; NFT artistBeeple; Ape DAO board members Amy Wu, Maaria Bajwa and Dean Steinbeck; Guy Oseary; Justin Beiber; Jimmy Fallon; Gwyneth Paltrow; Madonna; Paris Hilton; Serena Williams; Post Malone; Diplo; Snoop Dogg; Kevin Hart; Steph Curry; Future; The Weeknd; DJ Khaled; Adidas and several others.

The lawsuit alleges that BAYC and related NFTs "rely heavily on the perception that 'joining the club' ... brings investors status and provides them access to events, benefits, and other lucrative investment opportunities exclusive to BAYC holders."

"The exclusiveness of BAYC membership was entirely based on the inclusion and endorsements of highly influential celebrities," the lawsuit claims.

"Sales of digital assets like NFTs and tokens come with disclosure duties just like any other financial product," Jasnoch told CoinDesk. "And whether it is a company, [decentralized autonomous organization] or celebrity influencer, the individuals involved in misleading investors should be held accountable."

He added that celebrity endorsements created a "fear of missing out with an endless parade of Bored Ape and ApeCoin promotions. Had there been proper disclosure, the price wouldn't have swung so high and so wildly."

A spokesperson for Yuga Labs called the claims "opportunistic and parasitic. We strongly believe that they are without merit and look forward to proving as much."

Representatives for MoonPay and Guy Oseary did not immediately respond to CoinDesk's request for comment.

This is not the first time Scott+Scott attorneys have attempted to wage war on celebrity endorsements in the crypto space. The law firm was also behind the proposed class-action suit filed against celebrities including Kim Kardashian and Floyd Mayweather over their promotion of the cryptocurrencyethereumMaxon social media. A federal judge in Californiadismissed the suit on Thursday, stating that investors are expected "to act reasonably before basing their bets on thezeitgeistof the moment."

In his ruling, the judge said that lawyers for the plaintiffs could refile their lawsuit with amended claims.

"We were disappointed in the dismissal," Jasnoch told CoinDesk. "But the judge gave us leave to amend the complaint and gave us a bit of a road map to get a claim sustained. And he also said that the case raised important issues regarding celebrity promotion of crypto tokens."

Arts

https://www.coindesk.com/web3/2022/12/09/bieber-madonna-among-dozens-of-celebs-named-in-lawsuit-alleging-yuga-labs-nft-scheme/

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Schwifty
Ugh! I'm Schwifty. I've never told anyone this, but I once tricked a dog. I am 77% wizard, 88% Skydiving Instructor, and otherwise bad at math. Let's get busy!