A slew of celebrities such as Justin Bieber, Madonna, the Weeknd and Post Malone, artists and athletes among others have been named in a class action lawsuit against Yuga Labs, the creators of the popular Bored Ape Yacht Club (BAYC) NFTs.
According to the lawsuit, the celebrities misled their followers into buying BAYC non-fungible tokens and other unregistered securities issued by Yuga Labs to pump their value. This prompted buyers to purchase losing investments at drastically inflated prices.
Gwyneth Paltrow, Snoop Dogg, Stephen Curry, Kevin Hart, Future, Serena Williams and Diplo were also named as defendants in the case. Its alleged that Yuga Labs enlisted the celebrities to help artificially increase the value of the NFTs, resulting in staggering losses for the buyers.
Promotional Campaign was Successful
The lawsuit states that defendants' promotional campaign was wildly successful. It generated billions of dollars in sales and re-sales. "The manufactured celebrity endorsements and misleading promotions regarding the launch of an entire BAYC ecosystem were able to artificially increase the interest in and price of BAYC NFTs during the Relevant Period, causing investors to purchase these losing investments at drastically inflated prices.
Lawyers for Adam Titcher and Adonis Real filed the lawsuit in a California district court. Titcher said he purchased a pair of Yuga Labs NFTs and Real he bought Yuga Labs' cryptocurrency ApeCoin under the pretence it would be needed to buy things in the greater BAYC metaverse.
Entertainment manager Guy Oseary is alleged to have formed a partnership with Yuga Labs to leverage their vast network of A-list musicians, athletes and celebrity clients with those celebrities discretely paid for promotional work through the a crypto firm called Moon Pay, which is connected to Oseary's Sound Ventures capital firm. The lawsuit states that celebrity defendants, including Bieber, the Weeknd and Madonna acted as a promoter for the company and solicited sales of Yuga securities to the public.
Moreover, Jimmy Fallon and his Tonight Show production companies Electric Hot Dog and Universal Television are named as defendants because of his on-air segment where he and Paris Hilton discussed the popular NFTs.
Insidious Marketing
The complaint highlighted that the company's entire business model relies on using insidious marketing and promotional activities from A-list celebrities that are highly compensated to increase the demand of the Yuga securities. They persuade and convince potential retail investors that the price of the digital assets would appreciate.
Furthermore, the lawsuit alleged that each of the promoter defendants received digital assets from Moonpay or Yuga Labs for their endorsements. Pop singer Justin Bieber received BAYC NFT worth around $1.3 million when it was issued for an allegedly fraudulent post on Instagram stating that he bought the digital asset with his own money.
Similarly, Paltrow told investors on January 26 that she joined the BAYC community and thanked Moonpay for its services in making the purchase possible. But the actress didn't disclose that she has a financial stake in the firm.
Yuga Labs brushed off the lawsuit as opportunistic and parasitic. "We strongly believe that they are without merit, and look forward to providing as much."
