The proposed class-action lawsuit alleges that Yuga Labs “did not influence” the public to buy Bosen’s non-fungible Ape Yacht Club tokens (NFTs) and the project’s ApeCoin (APE) tokens.
Proposed class action lead by law firm Scott + Scott was published on July 21, claiming that Yuga Labs used celebrity promoters and endorsements to “inflate the price” of BAYC NFTs and APE tokens.
It also stated that Yuga Labs is promoting growth prospects and opportunities for large investment returns to “unsuspecting investors.”
“After selling millions of dollars from fraudulently promoted NFTs, YUGA LABS launches Ape Coin to further attract investors.”
“After it was revealed that the so-called growth is highly dependent on continuous promotion (competing with real utility or underlying technology) retail investors were left with tokens that lost more than 87% of their high price on April 28, 2022,” he said. added.
The law firm is currently looking for affected investors who suffered losses in BAYC NFTs and Apecoin between April and June this year.
During this period, APE rose to a high of $26.70, before falling by approximately 82.5% to $4.66 at the end of June, while the floor price from 151.5 Ether (ETH) dropped to 92.9 ETH.
So there is a class action lawsuit @yugalabs as investors were “inappropriately induced to buy financial products made by Yuga Labs”.
Very ridiculous Responsibility for your own actions people. https://t.co/WeuVVLNGv6 pic.twitter.com/7c9Jywvv9V
– Kevin Wu (@kevwuzy) July 24, 2022
The community didn’t seem surprised by the proposed lawsuit, with BAYC hodler @SoapBoxCar suggesting via Twitter on July 24 that a lot of angry people bought into the above and “getting rekt.”
User @briann6211 also highlighted an interesting point that Yuga Labs “never created a token … Apecoin DAO created a token that was later adopted” by the company. Some members also noted that Apecoin stalled after the free airdrop for BAYC holders, while the broader market also saw a sharp decline at the time.
Ironically yuga labs never created a token… Apecoin DAO created a token that was later adopted by Yuga Labs
— Brian (@briann6211) July 24, 2022
If the lawsuit ends up going to court, it looks like Scott+Scott will have to prove that Yuga Labs and its celebrity promoter failed to disclose information paid advertising, because it is legally required.
Since the law firm also claimed there was a pump and dump, it would have to prove that Yuga Labs engaged in such practices, which could be difficult given the strength of Yuga Labs’ project.
Pump and dumps, or pull the carpet usually indicates that a project has disposed of artificially developed assets in the community before leaving the project.
related: ApeCoin price points 45% rally after Otherside metaverse demo
The nature of Apecoin and BAYC NFTs can be difficult, as law firms must argue that they are promoted as investment contracts in the category unregistered securities.
Cointelegraph has reached out to Yuga Labs for comment on the proposed lawsuit, but has not heard back from the company.
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