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The class action lawsuit alleges that Yuga Labs leveraged a vast network of A-list athletes, musicians, and celebrity clients to push the sales of their NFT collection.
Yuga Labs, the creator of the popular Bored Ape Yacht Club (BAYC) NFTs, along with crypto fintech Moonpay is facing class action lawsuits over allegations of using celebrities to promote and sell non-fungible tokens (NFT) misleadingly.
The lawsuit has named a total of 40 people and companies as defendants in this matter. It includes top names such as Snoop Dogg, Paris Hilton, Justin Beiber, Jimmy Fallon, Serena Williams, Madonna, Diplo, Serena Williams, and Post Malone.
John T. Jasnoch of Scott+Scott Attorneys at Law LLP in the Central District of California filed the class action lawsuit last week on December 8. Jasnoch noted that crypto companies have been using their Hollywood network to promote crypto assets without complying with any disclosure requirements. Furthermore, the document added:
“This case epitomizes these concerns as it involves a vast scheme between a blockchain start-up company, Yuga Labs, Inc. (‘Yuga’), a highly connected Hollywood talent agent (Defendant Guy Oseary), and a front operation (MoonPay), who all united for the purpose of promoting and selling a suite of digital assets.”
Allegations on OpenSea and Oseary
The lawsuit alleges that both Oseary and Yuga Labs created a plan for leveraging a vast network of A-list athletes, musicians, and celebrity clients. By doing so, they created a perception of “joining the club” using Yuga Labs’ flagship NFT collection.
The lawsuit alleges: “The exclusiveness of BAYC membership was entirely based on the inclusion and endorsements of highly influential celebrities. But this purported interest in, and endorsement of, the BAYC NFTs by high-profile tastemakers was entirely manufactured by Oseary at the behest of the Executive Defendants”.
The class action lawsuit also refers to the statement of the US Securities and Exchange Commission (SEC) related to celebrity endorsements. As per the SEC, “these endorsements may be unlawful if they do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement”.
The class action was first proposed earlier this year in July 2022. Back then, law firm Scott+Scott said that Yuga Labs used celebrity endorsements to “inflate the price” of APE tokens and BAYC NFTs. Yuga Labs also has been a part of the wider investigation into the NFT markets by US regulators.
The regulators are also investigating if certain NFTs sold by Yuga Labs are “akin to stocks” and whether the sales would violate federal laws.