Yuga Labs may face a possible class-action lawsuit. Lawfirm Scott+Scott alleges that the company has falsely promoted its BAYC NFTs and Apecoin and has used celebrities to artificially inflate its prices.
Only a month after Yuga Labs filed a lawsuit against RR/BAYC for copyright infringement of its Bored Ape Yacht Club NFTs, this time, Yuga Labs itself has had a lawsuit filed against them.
Law firm Scott+Scott has proposed to file a class-action lawsuit alleging that Yuga Labs “inappropriately induced” the community to buy their Bored Ape Yacht Club NFTs and ApeCoin.
The proposed lawsuit claimed that Yuga Labs used the help of celebrity promotions and endorsements to inflate the price of its BAYC NFTs and Apecoin. It also accused both the NFTs and ApeCoin of being ‘securities’, being promoted to its investors as having huge returns on investments when in reality, its value plumutted over the course of a few months.
So there's a class action lawsuit against @yugalabs as investors were "inappropriately induced to buy financial products created by Yuga Labs".
— Kevin Wu 🦾🤖🦾 (@kevwuzy) July 24, 2022
The Law firm stated: “After selling off millions of dollars of fraudulently promoted NFTs, YUGA LABS launched the Ape Coin to further fleece investors.“
“Once it was revealed that the touted growth was entirely dependent on continued promotion (as opposed to actual utility or underlying technology) retail investors were left with tokens that had lost over 87% from the inflated price high on April 28, 2022,” it added.
At this moment, Scott+Scott has not yet filed an official complaint in a federal court as it claims to still be in the preliminary stage of looking for impacted investors who suffered losses on BAYC NFTs and Apecoin between April and June of this year.
What Will Happen if It Reaches Court
If this lawsuit officially reaches court, it may become tricky for the lawfirm to handle. Scott+Scott will need to have proof for their claims that Yuga Labs took part in a pump & dump scheme, they also need to have proof that Yuga Labs and their celebrity endorsements failed to disclose their paid advertisements.
Aside from that, claims that BAYC NFTs and ApeCoin are securities will also be difficult to prove as the Securities and Exchange Commission (SEC) has so far, never really labeled any NFT as a security due to its complicated nature.