A proposed class-action lawsuit alleges that Yuga Labs “inappropriately incentivized” the community to purchase Bored Ape Yacht Club non-fungible tokens (NFTs) and the project-affiliated ApeCoin (APE) token.
The proposed class-action, led by law firm Scott+Scott, was published on July 21, alleging that Yuga Labs used celebrity promoters and endorsements to “drive up the price” of the BAYC NFTs and the APE token.
It also claims that Yuga Labs has promoted its growth prospects and the potential for huge returns on investments to “unsuspecting investors.”
“After selling millions of dollars worth of fraudulently promoted NFTs, YUGA LABS launched the Ape Coin to help investors further.”
“Once it was revealed that the touted growth relied entirely on continued promotion (as opposed to actual utility or underlying technology), retail investors were left with tokens that lost more than 87% from the high price on April 28, 2022,” it added. .
The law firm is currently looking for affected investors who suffered losses on BAYC NFTs and Apecoin between April and June of this year.
During this period, APE rose to its all-time high of $26.70 before falling roughly 82.5% to $4.66 in late June, while the bottom price fell from 151.5 Ether (ETH) to 92.9 ETH.
So there is a class action lawsuit against @yugalabs because investors were “inappropriately induced to buy financial products from Yuga Labs”.
Extremely ridiculous Take responsibility for your own actions folks. https://t.co/WeuVVLNGv6 pic.twitter.com/7c9Jywvv9V
— Kevin Wu (@kevwuzy) July 24, 2022
The community seems relatively unaffected by the proposed lawsuit, with BAYC hodler @SoapBoxCar suggesting via Twitter on July 24 that a number of people are angry that they bought at the top and “got it stretched”.
User @briann6211 also highlighted an interesting point that Yuga Labs “never created a token … Apecoin DAO created a token which was then adopted by the company”. Several members also noted that the Apecoin plummeted after a free airdrop to BAYC holders, while the broader market was also suffering a sharp downturn at the time.
Ironically, yuga labs never created a token… Apecoin DAO created a token which was then adopted by Yuga Labs
— Brian (@briann6211) July 24, 2022
If the lawsuit eventually goes to court, it looks like Scott+Scott will have to prove that Yuga Labs and its famous promoters didn’t make their paid ads public because they are legally required to do so.
Since the law firm also claims that a pump and dump occurred, it would have to prove that Yuga Labs engaged in such practices, which can be difficult given the strength of Yuga Labs’ projects.
Pump and dumps, or carpet pulls, usually imply that a project has dumped artificially inflated assets onto a community before shutting down the project altogether.
Related: ApeCoin price eyes 45% rally following Otherside metaverse demo
The nature of Apecoin and BAYC NFTs can also be tricky as the law firm may have to argue that they were promoted as investment contracts in the unregistered securities category.
TBEN has contacted Yuga Labs for comment on the proposed lawsuit, but has yet to receive a response from the company.
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