Yuga Labs is among dozens of defendants facing a proposed class action that alleges the blockchain start-up, Hollywood agent Guy Oseary and fintech operation MoonPay conspired to leverage a vast network of A-list celebrities to misleadingly promote and sell at artificially inflated prices Yuga’s non-fungible tokens (NFTs), including the Bored Ape Yacht Club collection, and ApeCoin tokens.
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In addition to Yuga Labs, the “highly-connected” Oseary, and purported “white-glove” middleman MoonPay, the 94-page lawsuit out of California names as defendants several Yuga executives, consultants, spokespeople, board members and associates. Also named as defendants are Madonna, Tonight Show host Jimmy Fallon, Justin Bieber, Paris Hilton, Gwyneth Paltrow, Serena Williams, Post Malone, digital artist Beeple, American DJ Diplo, Snoop Dogg, comedian Kevin Hart, Golden State Warriors star Stephen Curry, rapper Future, The Weeknd, producer DJ Khaled, and Adidas America, among other individuals and entities alleged to have promoted the NFTs without disclosing to regulators their financial stake in the operation.
The suit’s filing on December 8 comes nearly seven months after the floor price of Bored Ape NFTs began to deflate in the wake of the failed launch of a related metaverse platform called Otherside and the botched sale of virtual real estate within it. Since April 30, the floor price of the NFTs is down 92.9 percent from its height, and the price of ApeCoin has fallen roughly 90 percent from its all-time high that same month, according to the lawsuit.
“Defendants’ actions falsely promoting the [Bored Ape Yacht Club] NFTs enriched themselves to the detriment of Plaintiffs and Class members,” the lawsuit summarizes. “While the Executive Defendants made hundreds of millions of dollars, investors were left with NFTs worth a fraction of their artificially inflated value.”
Welcome to the club?
Yuga Labs launched the Bored Ape Yacht Club collection of NFTs—cryptographic assets on a blockchain with individual identification codes and metadata distinguishing them from each other—on April 24, 2021, minting 10,000 Bored Ape NFTs and selling them over the course of a week until the official public launch date on April 30, the suit relays. Given that NFTs are non-fungible—as opposed to fungible cryptocurrencies such as Bitcoin—they cannot be traded or exchanged for equivalent value, and they often represent real-world tangible assets such as artwork or real estate.
The Bored Ape NFTs, which feature a picture of an animated ape with a bored facial expression, are customized with unique traits and characteristics, and are often distinguished in value by their “accessories,” the case explains. For instance, a Bored Ape Yacht Club NFT of an ape wearing sunglasses is “generally considered to be more rare (and thus more valuable) than one that does not have a similar fashion accessory,” the suit says.
According to the suit, the majority of Yuga’s business comes from its sale of NFTs, and the company also gets a 2.5 percent cut each time one of its NFTs is resold on the secondary market. Yuga reportedly earned $127 million in profit in 2021 from its NFT business, according to the complaint, and its portfolio of NFT collections, which includes the Mutant Ape Yacht Club collection, is “collectively worth billions,” the case says.
Seemingly not content with the “staggering profits” generated by the Bored Ape NFTs, Yuga’s execs also “created their own [money] out of thin air” by minting cryptocurrency called ApeCoins, the lawsuit goes on. According to the case, the Yuga execs represented prior to the token’s launch that Bored Ape NFT owners could receive an airdrop of ApeCoin for their “membership in the club.” Per the suit, this promotion was an attempt to mask what was a “pure cash grab” as “giving back” to the Bored Ape Yacht Club community while obscuring Yuga’s sale of “massive ApeCoin allocations” to retail purchasers.
The case alleges that the success of Yuga’s flagship Bored Ape NFT collection and related brand “rel[ied] heavily” on prospective investors’ perception that “joining the club” would give them access to “events, benefits, and other lucrative investment opportunities” only available to “members.” According to the suit, this mirage of exclusivity was “entirely manufactured by Oseary” at the behest of Yuga’s executives. To do this, Oseary tapped MoonPay; his own venture capital firm, Sound Ventures; and the celebrity defendants as early investors in the NFTs, the case alleges.
The suit claims that MoonPay, in reality, was used by Oseary and Yuga’s execs as a covert way to pay the celebrity NFT promoters “without disclosing it to unsuspecting investors”—or the Securities and Exchange Commission (SEC). More specifically, the “wildly successful”—and ultimately misleading—celebrity promotional campaigns for Bored Ape Yacht Club NFTs and Yuga’s other financial products artificially increased the interest in and price of the assets between April 23, 2021 and the present, causing investors to buy the “losing investments” at substantially increased prices, the filing alleges.
“At no point did any of the Defendants register these securities with the SEC,” the complaint says, alleging investors have been left with “staggering losses.”
Celebs and cryptocurrencies: a match “fraught with problems,” case says
As the lawsuit tells it, celebrity promotions of cryptocurrencies are dicey territory in that they may be illegal should the nature, source and amount of compensation directly or indirectly paid to the promoters not be disclosed to the public.
In October 2021, Yuga announced in Variety magazine that it had signed a representation deal with Oseary to expand Bored Ape Yacht Club NFTs into movies, TV, gaming and music, the complaint shares. In truth, however, Oseary was brought into the fray to actively recruit the celebrity defendants to solicit sales of Yuga’s financial products, the lawsuit says. Per the case, Oseary’s web of musicians, athletes and other celebrity clientele helped fortify the perception that Yuga’s Bored Ape Yacht Club NFT collection and other products were exclusive and in high demand.
To successfully wield the A-listers’ influence, Yuga execs and Oseary, agent to Madonna, Paltrow and Fallon, needed to make the promotion and subsequent interest in the Bored Ape Yacht Club appear organic, as opposed to some sort of blatant monthly promotional campaign, the lawsuit shares. Essentially, Yuga “needed a way to discreetly pay” its celebrity promoters, for which Oseary used MoonPay, a crypto payment service purportedly designed to help the super-rich buy NFTs without the hassles experienced by regular investors, according to the complaint.
In truth, however, MoonPay, for which several of the celebrity defendants were early investors, stood in as a mechanism to funnel money to the celebrity defendants in exchange for their manufactured endorsements, the lawsuit alleges. According to the case, the mechanics of how MoonPay works—how transactions are executed or who is ultimately paying to buy an NFT—are unclear.
“Oseary saw an opportunity to profit from using his celebrity contacts to promote the sale of Yuga securities, and he took it,” the filing says.
Together, Oseary, his roster of celebrities and MoonPay used their influence to artificially create demand for the Bored Ape NFTs and ApeCoin tokens, which in turn increased the use of MoonPay to handle the new demand for the financial products, the suit charges.
In one instance, Fallon promoted MoonPay on the Tonight Show, stating that he “got his first NFT” through the platform and claiming to have done his homework on how to buy an NFT before finding MoonPay, which he referred to as “the PayPal of crypto,” the case says. After “shilling” for MoonPay, Fallon then announced on the show that he bought a Bored Ape NFT, the filing says. The guest on that particular episode was Beeple, another client of Oseary, according to the suit.
“Fallon did not disclose that he had a financial interest in MoonPay or that he was likewise financially interested, directly or indirectly, in the increased sale and popularity of Yuga securities,” the case states, alleging Fallon’s production company and Universal Television also failed to disclose that they were in business with Oseary.
In November 2021, social media became rife with posts from Post Malone, The Weeknd and the other promoter defendants about Bored Ape Yacht Club NFTs, the filing says, with the celebrity endorsements continuing into early 2022.
“Upon information and belief, the Promoter Defendants each received Yuga Financial Products and/or other forms of consideration as part or all of their compensation for promoting the Yuga securities specifically or the Yuga brand generally,” the case alleges.
Who’s covered by the Bored Ape class action?
The case looks to represent all persons who, between April 24, 2021 and the present, bought a digital asset from Yuga Labs and were subsequently damaged.
I have a Bored Ape NFT and/or ApeCoin and lost money. How do I get involved?
We can’t predict whether you’ll get some or any money back on your investment, but we can provide a little insight into what comes next in the legal process.
When a proposed class action is initially filed, there’s usually nothing you need to do to join or add your name to the case. This is because, in most cases, it’s only when a proposed class action settles that the people affected by the suit, called “class members,” may need to act. This typically involves filling out and filing a claim form online or by mail.
Should the Bored Ape NFT case settle, eligible class members will most likely be notified directly about the deal and their legal rights going forward.