Law firm seeks disgruntled bored Ape Yacht Club investors in class action lawsuit over Yuga Labs overpromised returns |  News Artnet

Law firm seeks disgruntled bored Ape Yacht Club investors in class action lawsuit over Yuga Labs overpromised returns | News Artnet – Mail Bonus

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Yuga Labs, the company behind the popular Bored Ape Yacht Club NFT, may soon be staring down its nose at a lawsuit.

The law firm of Scott and Scott in New York seeks drum up the plaintiffs to file a class-action lawsuit against Yuga Labs, alleging the NFT juggernaut pushed celebrities to hype up the value of its tokens and lure “unsuspecting investors” with promises of high returns.

A number of stars, including Gwyneth Paltrow, Eminem and Madonna, acquired Bored Ape Yacht Club (BAYC) NFTs and promoted them on social media last year. In January, when Jimmy Fallon and Paris Hilton welcomed their cartoon monkeys on national television, it felt like a bad infomercial to many. Many of the new famous Ape collectors are with Creative Artists Agency (CAA), which owns part of OpenSea, a popular marketplace for NFTs. (Madonna’s manager, Guy Oseary, represents Yuga Labs and is also an investor in Yuga Labs.)

If it is to succeed, Scott and Scott need to prove that the BAYC NFTs are securities like stocks, bonds or options. Legally, anyone who issues securities must register them with the Securities and Exchange Commission to prevent fraud.

NFTs, because they are not volatile, are not usually thought of as securities, which they are. Each NFT is supposed to represent a unique object. But they can be considered securities if they pass the “Howey test,” a regulatory standard used to determine whether a transaction qualifies as an investment contract.

According to the Howey test, an investment contract exists if there is an “investment of money in a joint enterprise with a reasonable expectation of profit from the efforts of others. Yuga Labs, in this case, would be the actor behind the introduction of NFTs.

“I think some NFTs could be securities, and the courts and the SEC will analyze the offering under the Howey test,” Alma Angotti, a former director of the U.S. Treasury Department’s Financial Crimes Unit who now serves as a partner. at consulting firm Guidehouse Inc, Artnet News reported.

That litmus test was recently applied to Coinbase last year insider trading against a former employee and his friends. In particular, the SEC is reportedly View whether Coinbase illegally allowed users to trade digital assets that have not been registered as securities.

“If [Yuga Labs] was essentially selling the product as an investment that would increase in value based on the company’s efforts, then a court could find that security,” Angotti said. But if Yuga Labs is selling its NFTs – as most NFTs are sold – based on the premise that they might increase in value simply because people like them, then probably not.

“But it could still be fraud if they made false information,” she said.

In parallel cases, she pointed to the sale of fake art objects or matter wine that was fraudulently sold as rare and old. In other words, it might seem like something unique and special, but in fact it is not.

Scott and Scott’s proposed class action would also target Bored Ape Yacht Club’s original token, Apecoin. It is likely that they will have a much easier time claiming that Apecoin is a security. Apecoin has been listed on Coinbase since it launched in March, and SEC Chairman Gary Gensler has long argued that most cryptocurrencies are securities.

Scott and Scott have not filed a complaint yet. It is looking for disgruntled investors who suffered losses related to the Yuga Labs tokens between April and June. At the end of April, just before BAYC’s massive Otherdeed sale of virtual land within the proposed metaverse, Apecoin was worth $27. It later dropped as low as $3.50.

Neither Scott and Scott nor Yuga Labs responded to a request for comment.

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