Buyers of Bored Ape NFTs sue after digital apes turn out to be bad investment
Buyers of Bored Ape NFTs sue after digital apes turn out to be bad investment
Lawsuit: Sotheby's $24M sale to FTX gave Bored Ape NFTs "an air of legitimacy."
Archived version: https://archive.ph/9WPwx
The Sotheby's auction house has been named as a defendant in a lawsuit filed by investors who regret buying Bored Ape Yacht Club NFTs that sold for highly inflated prices during the NFT craze in 2021. A Sotheby's auction duped investors by giving the Bored Ape NFTs "an air of legitimacy... to generate investors' interest and hype around the Bored Ape brand," the class-action lawsuit claims.
The boost to Bored Ape NFT prices provided by the auction "was rooted in deception," said the lawsuit filed in US District Court for the Central District of California. It wasn't revealed at the time of the auction that the buyer was the now-disgraced FTX, the lawsuit said.
"Sotheby's representations that the undisclosed buyer was a 'traditional' collector had misleadingly created the impression that the market for BAYC NFTs had crossed over to a mainstream audience," the lawsuit claimed. Lawsuit plaintiffs say that harmed investors bought the NFTs "with a reasonable expectation of profit from owning them."
Sotheby's sold a lot of 101 Bored Ape NFTs for $24.4 million at its "Ape In!" auction in September 2021, well above the pre-auction estimates of $12 million to $18 million. That's an average price of over $241,000, but Bored Ape NFTs now sell for a floor price of about $50,000 worth of ether cryptocrurrency, according to CoinGecko data accessed today.
Investors previously sued Bored Ape creator Yuga Labs, four company executives, and various celebrity promoters including Paris Hilton, Gwyneth Paltrow, Kevin Hart, Snoop Dogg, Serena Williams, Madonna, Jimmy Fallon, Steph Curry, and Justin Bieber. The original class-action was filed in December 2022, and Sotheby's was added as a defendant in an amended complaint submitted on August 4.
Yuga describes its collection of 10,000 Bored Ape NFTs as "unique digital collectibles living on the Ethereum blockchain" that double as a "Yacht Club membership card." The website has some "members-only" areas. "When you buy a Bored Ape, you're not simply buying an avatar or a provably rare piece of art," the NFT collection's website says. "You are gaining membership access to a club whose benefits and offerings will increase over time. Your Bored Ape can serve as your digital identity, and open digital doors for you."
Lawsuit: Yuga “colluded” with Sotheby’s
The amended lawsuit alleges that "Yuga colluded with fine arts broker, Defendant Sotheby's, to run a deceptive auction." After the sale, a Sotheby's representative described the winning bidder during a Twitter Spaces event as a "traditional" collector, the lawsuit said.
The lawsuit said it turned out the auction buyer was now-bankrupt crypto exchange FTX, whose founder Sam Bankman-Fried is in jail awaiting trial on criminal charges. Ethereum blockchain transaction data shows that after the auction, "Sotheby's transferred the lot of BAYC NFTs to wallet address 0xf8e0C93Fd48B4C34A4194d3AF436b13032E641F3,77 which, upon information and belief, is owned/controlled by FTX," the complaint said. Speculation that FTX was the buyer had been percolating since at least January 2023.
The lawsuit alleges that Yuga Labs and Sotheby's violated the California Unfair Competition Law, the California Corporate Securities Law, the US Securities Exchange Act, and the California Corporations Code. The plaintiffs also claim that Sotheby's Metaverse, an NFT trading platform opened after the auction, "operated (or attempted to operate) as an unregistered broker of securities."
"FTX has several deep ties to Yuga such that it would be mutually beneficial for both Yuga and FTX (as well as Sotheby's) if the BAYC NFT collection were to rise in price and trading volume activity. Upon information and belief, given the extensive financial interests shared by Yuga, Sotheby's and FTX, each knew that FTX was the real buyer of the lot of BAYC NFTs at the Sotheby's auction at the time that Sotheby's representatives were publicly representing that a 'traditional' buyer had made the purchase," the lawsuit said. FTX is not named as a defendant.
Ape prices soared, then plummeted
After the auction, the price of Bored Ape digital assets hit a new high and kept rising for months. It peaked at over $420,000 in April 2022 but plummeted to about $90,000 six weeks later, according to CoinGecko.
The class action lawsuit's named plaintiffs are Johnny Johnson, Ezra Boekweg, Mario Palombini, and Adam Titcher. They are trying to get certification of a class consisting of "all investors who purchased Yuga's non-fungible tokens ('NFTs') or ApeCoin tokens ('ApeCoin') between April 23, 2021 and the present." There were over 103,000 account holders of Yuga securities as of December 1, 2022, the lawsuit said.
"While the Executive Defendants made hundreds of millions of dollars, investors were left with NFTs worth a fraction of their artificially inflated value," the original version of the complaint in December said.
Yuga and other defendants have a September 12 deadline to file motions to dismiss the complaint. Sotheby's told CNN this week that the "allegations in this suit are baseless, and Sotheby's is prepared to vigorously defend itself." Yuga Labs similarly called the allegations "completely without merit or factual basis."
This aged well.
The C&H people don't fucking pull punches and I love it. A few weeks ago when elmo rebranded twitter he asked people for a new logo and a C&H artist replied with the confederate flag
way too based from C&H
So, dumb question, but that picture is tiny and I cant read it.
and its not clickable so i can view a bigger version.
and if I zoom the browser in, the image stays the same size.
how is everyone else reading this damn thing?
If you bought one the best thing to do (financially) is to immediately sell it off to another sucker, perpetuating the cycle of scams. (Make sure to hype it on Reddit or Twitter so you can sell it for even more)
Who would've thought that an incredibly dubious claim to "ownership" of a JPEG image would fall in value so dramatically?
The amazing thing is that, although they have depreciated by about $190,000 each, they're still selling for $50,000 each. How can they still be valued at that much?
Money laundering.
If only someone told them... Except you know, literally every person on every social media ever. How did these people just like not look at the social media around these at all??
Because when idiots see criticism they take it as haters just hating and it strengthens their convictions.
You don’t even need to be told. NFTs were very obviously stupid. I guess it’s true that the fool and his money is easily parted.
Even they knew it was bs. Their supposed confidence in nfts was just them trying to drive the market up so they could unload it on the next sap. They didn't consider that they were the sap all along. The collapse was faster then crypto because nfts don't even have a real utility. And yes, crypto does have a utility as currency in nitche communities, but most people treated it like commodity.
Also, the Dacia Sandero got DELAYED!
James May is inconsolable.
This NFT frenzy is just calling for memes
Seriously, fuck rich and stupid people.
"Oh no - we invested our money in racist monkey JPEGs ignoring any risk and lost some of it.
Now instead of accepting the loss like most individual investors, we sue to game the system in our favor in yet another way."
Wait, are they racist? I haven't bothered to look through them though.
Because, as always, the poor are kept poor and the rich are kept rich.
I think most people that lose money in NFT and shitcoin scams are not the ultra rich, but normal people looking to grow their savings to avoid having to work multiple jobs just to break even. I know people that have lost years of savings and some even got evicted because of this crap. Most ultra rich know these are scams, after all, they have to get rich somehow.
"Wait, these are just ordinary tulips!"
I might switch from index funds to stock picking if I'm too able to get my money back for every bad investment I make
Now they can join the select club of people who are suing NFT makers after being conned into buying them.
I'm gonna sue my grocery store, they sold me some ham I didn't like
You are joking, but every grocery shop I go to would gladly reimburse you if you bought some ham you didn't like. They would even ask you what was wrong with it, if there might be a health concern they will do a full recall. If they get too many complaints, they will pull the product. The price of a single ham is easily worth the feedback on the product and the continued loyalty of the customer.
Yup. This is especially true for Costco, where you don't even need a good reason to return something. Some grocery stores may refuse a refund, but Costco will pretty much always honor it.
I used to work at walmart, in college. I recall once we had someone return a more than half eaten rotisserie chicken. They said it tasted funny... after eating half... probably in their car. It was still luke warm.
It's cool. It's hip. It's Blockchain! Come on, folks, let's invest in boring and colorful monkeys. You WILL be rich beyond imagination!
They weren't even uniquely drawn, they just mr potato head combined a handful of components
Can't say they didn't get what they deserved but of course any NFT scammer deserves some jail time too.
I am content to watch everyone involved consume each other
It's cool. It's hip. It's Blockchain! Come on, folks, let's invest in boring colorful monkeys. You WILL be rich beyond imagination!
Now they "only" sell for about 50,000. There's still plenty of people who don't get why it's not worth that much.
Yeah, I might pay a couple bucks for one as a conversation piece, but that's about it. And I'm not sure if I'd actually pull the trigger.
Ponzi schemes are generally not good investments
Who could have possibly predicted that?
Looooooooooooooooooooooooool
This is the best summary I could come up with:
The Sotheby's auction house has been named as a defendant in a lawsuit filed by investors who regret buying Bored Ape Yacht Club NFTs that sold for highly inflated prices during the NFT craze in 2021.
"Sotheby's representations that the undisclosed buyer was a 'traditional' collector had misleadingly created the impression that the market for BAYC NFTs had crossed over to a mainstream audience," the lawsuit claimed.
Investors previously sued Bored Ape creator Yuga Labs, four company executives, and various celebrity promoters including Paris Hilton, Gwyneth Paltrow, Kevin Hart, Snoop Dogg, Serena Williams, Madonna, Jimmy Fallon, Steph Curry, and Justin Bieber.
The lawsuit said it turned out the auction buyer was now-bankrupt crypto exchange FTX, whose founder Sam Bankman-Fried is in jail awaiting trial on criminal charges.
Ethereum blockchain transaction data shows that after the auction, "Sotheby's transferred the lot of BAYC NFTs to wallet address 0xf8e0C93Fd48B4C34A4194d3AF436b13032E641F3,77 which, upon information and belief, is owned/controlled by FTX," the complaint said.
"While the Executive Defendants made hundreds of millions of dollars, investors were left with NFTs worth a fraction of their artificially inflated value," the original version of the complaint in December said.
I'm a bot and I'm open source!
Scammer: "Buy a Jpeg everyone can download"
Investor: "Sounds like I can get rich with that. How much does one cost?"
Scammer: "20,000 to 50,000"
Investor: "Okay, I take four!"
People download jpegs instead of buying NFTs and making fun of it
Investor: "I lost all my money. I sue you!"These are literally the worst investment possible, because all the value comes from speculation (people buying them to get rich quick). As soon as those buyers get spooked the cones crashing down to zero. With something like a share in a company, that entitled the holder to partial ownership of the company. Even if the company goes bankrupt, you would still get a share in the former assets of the company. You can of course lose money if you buy at a price that is much higher then the actual value due to speculation, but this is limited by the intrinsic value of the company's assets.
So many things wrong the buyer was aware, starting with they sold too many for too much, future popularity overestimated, low artististic value, etc. What will become a priced collectible is not something you can easily predict, this is Beanie babies all over, the kind of history that likes to repeat.
@soyagi like, it was obvious to lord of us from the start that NFTs are a scam. Some people let their greed cloud their better judgement, and now they want it to be someone else’s fault.
But Gary Vee told me how important they are!
This reminds me a great deal of beanie babies....
Or tulips from the 17th century
No shit it's a bad investment LOL
Permanently Deleted
So many things wrong the buyer was aware, starting with they sold too many for too much, future popularity overstimulated, low artististic value, etc. What will become a priced collectible is not something you can easily predict, this is Beanie babies all over, the kind of history that likes to repeat.
How wonderful that it peaked at 420.
I personnaly think there are very genuine use cases for NFTs, like for owning music, movies or games just like they are physical copies. You would own them and could resell them when you want. But for ugly randomly generated drawings of monkeys, theres litterally no point.
What benefit does that give over something vendor controlled like the Steam Marketplace? Of the NFT is some form of DRM it's already going to be tied to a vendor to give you access to it. If the vendor stops giving you access to it via the NFT for whatever reason then you still have a worthless token. It's something that can happen with or without the Blockchain. It's just making it extremely more costly to do for zero benefits.
The benefit is that you could have a distributed marketplace. Instead of having monopolies like steam where one company accumulates a bunch of power they can abuse you could have multiple small companies band together to support a common standard of ownership so you could buy from any company and all the companies supporting the standard would respect it. You could also tie it to a legal contract so it's actually enforceable.
Of course you could just do that with an centralized standard that's backed by multiple companies too.
Horizontal scalability mostly. Blockchain tech works on an international scale without you needing to manually go and setup servers all over the world. It's good for the middleground of "We want our service to work on the international scale, without having to invest in standing up servers all over the place and writing the massive amount of code required to keep them all in synch with each other"
If you can afford your own personal servers all over the world, then its not much of a selling point. But typically it works out to being cheaper when you actually need it.
So for example if you wanna sell the deed/rights to to someone on the other side of the world, it works quite well.
It's extremely difficult to horizontally scale databases and is notoriously the biggest challenge for going international.
For some perspective, even Amazon, the company that literally owns and operates AWS, uses a totally separate copy of Amazon for its various areas of the world with no crossover. You cannot use your US amazon account for the Europe version of Amazon, you must make a new account on the Europe server.
And if you have ever played a videogame that is international scale with multiple servers, you also likely know that the process of "migrating" your character from one server to another actually requires a bit of a small process.
There are some games that actually provide the ability to login to any server with the same account, but they are the minority and the actually use a similar algorithm to how Lemmy works, where all the servers act as a federation to stay in synch with each other.
Blockchain tech has its own methods it has used to solve these issues, its called the Byzantine Generals Problem if you wanna read up on it more.
You can already do all that without NFTs and NFTs don't improve on any of existing ways to do that in any way
How? Specifically? Because I've heard this dozens of times, always for problems that already have generally accepted solutions, and when asked to elaborate, nobody could really explain any case where it's an improvement, or new functionality.
The blockchain is mostly just a ledger. You can get the same level of tamper protection, transparency and whatever other benefits with non-blockchain tech (or, if I'm wrong, someone please explain how). In the case of NFTs it is a big list of "X owns Y", which is functionally (and logically) the same as any other way of saying it. The crypto aspect could have just used decades old tech (public-key signing) and been functionally the same, too - but simpler and less resource intensive.
And, of course, just writing something doesn't make it true, even if you throw lots of encryption at it afterwards: NFTs aren't even access control, as far as I understand. Right click the ape, now you "have" the ape for all intents and purposes. You're not whoever happens to be "the owner" listed in the ledger, but that won't stop you seeing, distributing or changing it. I guess technically you could use that ownership to protect the data somehow, but then you'd be left with "hey, I have a really cool ape pic... in a safe, so nobody else can see it".
NFTs doesn't let you own anything but a link. And it is inefficient, insecure and energy wasting. Also you can already do what you are suggesting with existing technology.
You're as confused by this as all the NFT buyers. You don't OWN the NFT. It's not like the bits of the image/music/game are in the blockchain and you're the only one that can access and decrypt them somehow.There are still going to be unlimited copies of this thing so everyone can own it same as you. NFT is only a record saying that you own something. I can set up an excel file that will record who owns what and write down there that you own this very comment. Would pay me for it?
I already know this, which is why I'm saying it could be of use for things like game licenses that you can then sell to an individual like you could with a physical copy of the game. It's not for the exclusivity it's for that it's a good way to bring back some of the benefits of physical games to a 100% virtual system