According to rumors, the famous company that created Bored Ape Yacht Club’s NFT collection, Yuga Labs, may face a lawsuit from a group of investors for selling securities that failed to have guaranteed returns.
The allegations against Yuga Labs
“Yuga Labs investors were inappropriately induced to buy financial products created by Yuga Labs (YUGA LABS), namely the Ape Coin and the Bored Ape Yacht Club non-fungible tokens (“NFTs”). The YUGA LABS leadership used celebrity promoters and endorsements to inflate the price of the company’s NFTs and token, by generally promoted the growth prospects and change for huge returns on investment to unsuspecting investors”.
This is the text of the lawsuit in the form of a class action that the famous Los Angeles law firm, Scott & Scott, is reportedly filing against the makers of the famous NFT Bored Ape Yacht Club collectibles.
The lawsuit will argue before a court that investors were misled by the company that promised returns that were then not met at all. The lawsuit would still be in the preliminary stage and the law firm is reportedly gathering endorsements from investors.
The key issue underlying the chances of success of this class action against Yuga, once filed, will be whether or not the court will determine that NFTs can be considered securities, similar to stocks. If a court finds that BAYC NFTs are securities, Yuga Labs would have failed to fulfill the necessary disclosure and registration obligations arising from the securities offering.
This has been the subject of several lawsuits filed by the SEC against companies in the industry over the past two years. The latest is the long-running case with Ripple in December 2020, which only now seems to be resolving favorably for the crypto company.
ApeCoin is the main reason for the class action lawsuit
According to the indictment, Yuga Labs used sponsors and famous faces to convince investors to buy the monkey collections and the ApeCoin coin, which allegedly lost as much as 87% of its value in just a few months.
However, it is difficult for a court to consider Yuga Labs’ NFTs as securities, whereas it is easier for the lawsuit to succeed if it refers only to the ApeCoin token.
In late June, Yuga Labs sued an artist creator of a Bored collection, Ryder Ripps, for confusing investors. The lawsuit filed by Yuga, accuses Ripps and other artists of minting and selling identical copies of Bored Apes and using misleading labels and tracking information to make them appear legitimate.
Our security team has been tracking a persistent threat group that targets the NFT community. We believe that they may soon be launching a coordinated attack targeting multiple communities via compromised social media accounts. Please be vigilant and stay safe.
— Yuga Labs (@yugalabs) July 18, 2022