Yuga Labs seems to be on the other side of the courtroom, thanks to a recent lawsuit against it.
The developer of the Bored Ape Yacht Club (BAYC) is being sued by a law firm for allegedly promoting false BAYC NFTs and its Ethereum token, Apecoin, as securities with guaranteed returns, per Decrypt.
The drop of BAYC NFTs and Apecoin's values is directly connected to the ongoing "crypto winter," which not only affected NFT and cryptocurrency owners but also companies like Tesla.
Yuga Labs Lawsuit Details
Yuga Labs recently announced last week it had received a class-action lawsuit from law firm Scott+Scott for reportedly promoting BAYC NFTs and ApeCoin, BAYC's native Ethereum token, as securities with guaranteed returns when its value has plummeted over the last three months due to the ongoing "crypto winter."
The law firm also claimed that Yuga Labs also used celebrity promoters and growth prospects to make the two tokens' values appear to be high, which may have deceived people to invest their money in the tokens, per Coin Telegraph.
However, Scott+Scott is still in its preliminary stage of seeking plaintiffs who suffered losses due to the false advertising of the two previously mentioned tokens from April to June.
According to the law firm, this April-to-June timeframe was critical to the case as the two tokens' values dropped during this time. ApeCoin was observed to have a surge of $26.70 before dropping to $4.66 at the end of June - an 82.5% decrease in value within a three-month period. Furthermore, ApeCoin's floor price went down from 151.5 Ether (ETH) down to 92.9 ETH.
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Scott+Scott is hoping that the court will determine that NFTs are securities that can increase in value over time, similar to a company's shares. Should this happen, Yuga Labs would have failed to make the necessary disclosure and registration obligations that come with offering securities.
Additionally, Scott+Scott will need to prove to the court that Yuga Labs have engaged in practices that are artificially increasing the value of the two tokens, which may prove difficult due to the strength of Yuga Labs' projects.
However, the Securities and Exchange Commission (SEC) is highly likely to step in to prevent the court to define NFTs and cryptocurrencies as securities.
Brian Fyre, a professor of law at the University of Kentucky, believes that cryptos and NFTs being classified as securities may open "a huge can of worms for [it] and force them to regulate all manner of other things that [it] doesn't want to be regulating."
BAYC And ApeCoin Enthusiasts' Reactions
The BAYC community seems unaffected by Scott+Scott's lawsuit as many of its vocal members have condemned it. For instance, Kevin Wu, the founder of GRAYCRAFT NFT, mentioned on his Twitter account that the lawsuit is "extremely ridiculous."
Another member, Twitter user @SoapBoxCar, said that the lawsuit was created by "a bunch of mad people" because they "got rekt" for buying at the surge of ApeCoin but were devastated by the sudden decrease.
