Legal Battle Unveiled: Lawsuit Targets Sotheby's Over Bored Ape NFT Auction Deception

Investors who regret buying Bored Ape Yacht Club NFTs that were sold for wildly inflated prices during the NFT boom in 2021 have launched a lawsuit, and Sotheby's auction house has been named as a defendant. 

According to the class-action lawsuit, a Sotheby's auction deceived investors by giving the Bored Ape NFTs "an air of legitimacy... to generate investors' interest and hype around the Bored Ape brand."

According to a lawsuit submitted to the US District Court for the Central District of California, the increase in Bored Ape NFT prices brought on by the auction "was rooted in deception." 

The lawsuit claimed that when the auction took place, it was not made known who the winning bidder—the now-infamous FTX—was.

"Sotheby's claims that the undetailed purchaser was a "traditional" collector had falsely implied that the market for BAYC NFTs had expanded to include a wider audience, according to the lawsuit. 

According to the lawsuit's plaintiffs, investors who suffered losses purchased the NFTs "with a reasonable expectation of profit from owning them."

At its "Ape In!" auction in September 2021, Sotheby's sold a lot of 101 Bored Ape NFTs for $24.4 million, much exceeding the pre-auction expectations of $12 million to $18 million. 

That amounts to an average price of nearly $241,000, but according to data from CoinGecko acquired today, Bored Ape NFTs are now sold for a floor price of roughly $50,000 in ether cryptocurrency.

A number of celebrity promoters, including Paris Hilton, Gwyneth Paltrow, Kevin Hart, Snoop Dogg, Serena Williams, Madonna, Jimmy Fallon, Steph Curry and Justin Bieber, were previously sued by investors, along with the firm that created Bored Ape, four executives, and the developer Yuga Labs. 

The initial class action lawsuit was filed in December 2022, then on August 4, an amended complaint was filed, including Sotheby's as a defendant.

10,000 Bored Ape NFTs from Yuga are described as "unique digital collectibles living on the Ethereum blockchain" that also serve as a "Yacht Club membership card." There are several "members-only" sections on the website. 

The website for the NFT collection states that when you purchase a Bored Ape, "you're not just buying an avatar or a verifiably rare piece of art." 

By becoming a member, you will have access to a club with growing advantages and offerings. Your Bored Ape can act as your online identity and help you access online resources.

Suit alleging Yuga "colluded" with Sotheby's

Yuga "colluded with fine arts broker, Defendant Sotheby's, to run a deceptive auction," according to the updated complaint. 

During a Twitter Spaces event following the sale, a Sotheby's representative described the successful bidder.

The now-bankrupt cryptocurrency exchange FTX, whose founder Sam Bankman-Fried is in custody awaiting trial on criminal charges, was revealed to be the auction buyer, according to the lawsuit. 

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." 

According to the complaint's assertion of Ethereum blockchain transaction data. Since at least January 2023, there have been rumors that FTX was the purchaser.

In the case, it is claimed that Yuga Labs and Sotheby's broke the California Corporations Code, the US Securities Exchange Act, the California Corporate Securities Law, and the California Unfair Competition Law. 

Additionally, the complainants assert that Sotheby's Metaverse, an NFT trading platform launched following the auction, "operated (or attempted to operate) as an unregistered broker of securities."

Due to FTX's numerous close connections to Yuga, an increase in the value and trading activity of the BAYC NFT collection would be advantageous to both Yuga and FTX (as well as Sotheby's). 

"Upon knowledge and belief, Sotheby's, Yuga, and FTX each knew that FTX was the actual 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, given the extensive financial interests shared by Yuga, Sotheby's, and FTX," the lawsuit claimed. None of the defendants include FTX.

Prices for apes rose, then fell.

Following the auction, the cost of Bored Ape's digital assets reached a new high and continued to rise for several months. 

The maximum was over According to CoinGecko, the amount was $420,000 in April 2022 but fell to roughly $90,000 six weeks later.

The identified plaintiffs in the class action complaint are Adam Titcher, Mario Palombini, Ezra Boekweg, and Johnny Johnson. 

They are attempting to certify a class of "all investors who purchased Yuga's non-fungible tokens ('NFTs') or ApeCoin tokens ('ApeCoin') between April 23, 2021 and the present." 

As of December 1, 2022, there were about 103,000 account holders of Yuga securities, according to the lawsuit.

"While the Executive Defendants made hundreds of millions of dollars, investors were left with NFTs worth a tiny fraction of their artificially inflated value," the original complaint in December stated.

There is a September 12 deadline for Yuga and other defendants to submit petitions to dismiss the complaint. 

This week, Sotheby's informed CNN that the "allegations in this litigation are unfounded, and Sotheby's is ready to zealously defend its position.

Yuga Labs characterized the claims in a similar way, calling them "completely without merit or factual basis."