Auction house Sotheby’s has found itself in a legal thunderstorm after aggrieved Bored Ape Yacht Club (BAYC) investors added the company as a defendant in a class-action lawsuit.
The latest move will see Sotheby’s join ranks with BAYC creators Yuga Labs and a group of A-list celebrities, including Paris Hilton and Justin Beiber. The crux of their case revolves around the claim that the defendants made false representations about the non-fungible tokens (NFTs) to sell the digital collectibles for higher prices.
Specifically, the plaintiffs point to the famous sale of the NFTs at Sotheby’s in September that netted over $24 million in sales. The aggrieved investors say that the sale of 101 BAYC NFTs exceeded presale estimates by up to $10 million, blaming the auction house for the increase in valuation.
They argue that Sotheby’s misled investors by creating “the impression that the market for BAYC NFTs had crossed over to a mainstream audience.” Per the filing, the plaintiffs are hinging their argument on a statement by a Sotheby’s executive that the winning bidder was a traditional art collector, but on closer inspection, troubled digital currency exchange FTX was the actual winner.
“Behind this scheme, Defendants Yuga and Sotheby’s were conspiring with FTX to manipulate the price of the BAYC NFT collection,” the filing read. “The misleading promotions of the auction by the Company and Sotheby’s successfully induced additional purchases of the BAYC NFT collection.”
Shortly after the sales, the floor price of BAYC collectibles tumbled in 2022 as global interest in NFTs waned. Affected investors are heaping blame on Sotheby’s and other defendants for whittling down the prospects of the bursting of the NFT bubble.
Sotheby’s has described the class-action suit as “opportunistic” and says it is ready for a spirited defense. The auction house disclosed that at the time of the auctions, the average BAYC collectible was valued at over $70,000 and there is no supporting proof that the token prices surged after Sotheby’s involvement.
“The allegations in this suit are baseless, and Sotheby’s is prepared to vigorously defend itself,” the firm said.
The auction house is also leaning on a statement by commissioners of the U.S. Securities and Exchange Commission (SEC) that NFTs are not securities unless sold fractionally.
A rough patch for BAYC
As floor prices for BAYC collectibles fell to lows of $53,000 per piece, the creators of the NFT have been juggling legal and regulatory troubles. In late 2022, the SEC launched a probe against Yuga Labs over claims that it may have offered unregistered securities.
After months of legal back and forth, Yuga Labs announced that it had settled a BAYC trademark lawsuit but still faces tougher legal battles with Ryder Ripps over the satirical depictions of BAYC tokens.
“Copying is not satire, it is theft. And lying to consumers is not conceptual art, it is deception,” said Yuga Labs ahead of the legal showdown.
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