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Cryptogambling / Sotheby’s named defendant in Yuga Labs lawsuit

Sotheby’s named defendant in Yuga Labs lawsuit

Publish Date: 16/08/2023
Sotheby's, tags: named defendant - CC BY-SA

Sotheby’s – CC BY-SA

New York-based auction house Sotheby’s has been named defendant in a class action lawsuit against Web3 company Yuga Labs.

Initially targeting only Yuga Labs, Sotheby’s is accused of actively participating in misleading investors about the value of Bored Ape Yacht Club (BAYC) NFTs. The lawsuit centers on an auction that Sotheby’s held in September 2021, which sold a collection of 101 BAYC NFTs for $24,393,000 to an unnamed buyer.

Sean Masson, an attorney representing the plaintiffs, said the auction house lent the NFT collection a “stamp of approval,” deceptively passing off the collection as “a legitimate investment.”

Investors also argued that Sotheby’s misrepresented the buyer of a BAYC NFT collection. Sotheby’s NFT specialist Max Moore described the buyer of a popular BAYC NFT as a “traditional buyer” on social media. In contrast, the filing claims that the buyer was affiliated with FTX investment arm FTX Ventures.

According to the filing, Moore’s online statement “misleadingly created the impression that the market for BAYC NFTs had crossed over to a mainstream audience.” Further findings by the investors include that FTX was also an investor in Yuga Labs’ fundraising round last year.

However, a representative from Sotheby’s claimed the allegations were “baseless” and that the auction house would defend itself from the accusations. The auction house reaffirmed its “commitment to transparency and integrity in all dealings.”

As Sotheby’s scales back its NFT-related operations, the lawsuit highlights the auction house’s representations of its digital asset sales. Last month, a report by ARTnews revealed that several senior employees who worked on NFT sales had been laid off since April. Some other staffers from Sotheby’s Metaverse have left the company as well.

The firm’s cutbacks in its NFT-related staff came after the NFT market experienced turbulence. Since its 2021 peak, the crypto market has lost roughly two-thirds of its value.

Despite that, sales from liquidated crypto companies are still ongoing. The auction house generated $11 million from the bankruptcy sales of Three Arrows Capital, a crypto hedge fund based in Singapore.

Other names mentioned

The lawsuit also called out several celebrities in the civil action, including Justin Bieber, Jimmy Fallon, Madonna and Paris Hilton. These celebrities have been distancing themselves from the collection creator due to the drop in NFT value and floor prices of some prominent collections — including BAYC.

Fallon’s lawyers have said he is not affiliated with Yuga Labs beyond purchasing a Bored Ape NFT. Fallon mentioned the NFT ownership on two episodes of his The Tonight Show.

Meanwhile, Bieber’s Bored Ape NFT has lost as much as 95 percent of its value since he purchased it for $1.3 million in January 2022. Today, it is worth closer to $60,000.

Initially filed in December 2022, the lawsuit also targeted Adidas, MoonPay and Hollywood agent Guy Oseary.

Future implications

Analysts point out that the addition of Sotheby’s as a defendant in the lawsuit highlights the risks associated with the market. As the market grows and eventually reaches mainstream audiences, regulatory scrutiny will also increase.

These allegations might present a significant challenge to the 250-year-old auction house, according to NFT News Today. Its involvement with NFTs demonstrates its willingness to adapt to modern trends, but the legal battle could hinder its activities in the digital asset sector. If the court ruling favors the plaintiffs, it would damage Sotheby’s reputation as one of the world’s oldest and largest digital art auction houses.

Analysts say this lawsuit’s outcome will also significantly impact the future of NFT transactions.

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