When you lose something, it’s tempting to point the finger of blame somewhere… anywhere. Now, a class-action lawsuit with a star-studded cast of defendants has been started, suggesting celebrity endorsers could be responsible for the current NFT crash.
A slew of Hollywood A-listers, including Justin Bieber, Jimmy Fallon, and Madonna, are being blamed for the great NFT crash of 2022. Two Yuga Labs investors, who have now suffered loss of investment, are attempting to recoup their losses.
Are NFTs Dying?
If you’ve seen most of the news around NFTs lately, you’d be fogiven for thinking that NFTs are dying. At the beginning of this year, NFTs had a very healthy trading volume of $17 billion. That number dropped to $466 million by September 2022. That’s a decrease of over 97%. Ouch.
There are a few theories as to why the value of NFTs is plummeting so significantly. Some credit the crypto bear market for the reduction in value of NFTs. Others say that people are waking up to the fact that many of the popular NFTs that were invested in for eyewatering sums are basically useless.
People have spent unbelievable amounts on NFTs like those from the Bored Ape Yacht Club collection. The most expensive BAYC NFT sold for over $3 million! Whilst these NFTs are said to have utility – since they unlock membership perks – they don’t really serve much of a purpose. There’s a widespread feeling that digital art NFTs and digital collectibles may have well and truly had their day.
BAYC Class-Action Lawsuit
Two plaintiffs, Adonis Real and Adam Titcher, have claimed that Yuga Labs, the parents company of BAYC, engaged in a conspiracy with celebrities to defraud potential investors. Real and Titcher are both stakeholders in Yuga Labs, having purchased various Bored Ape NFTs.
The lawsuit claims that, through their endorsement, celebrities misled people into investing in over-inflated NFTs. In order to cover damages, the lawsuit is seeking $5 million on behalf of the plaintives. There are 37 defendants involved in the case, with names including Kevin Hart, Gwyneth Paltrow, and Snoop Dogg.
Yuga Labs has commented on the trial, saying: “In our view, these claims are opportunistic and parasitic. We strongly believe that they are without merit, and look forward to proving as much.”
The plaintiffs allege that the famous defendants used social media and other means to convince people to invest in NFTs, after prices had been ballooned to “artifically inflated and distorted” levels. They also claim that the celebrities enaged in misleading promotions, and did not discolse alleged financial compensation.
This particular class-action covers the period from April 2021 to the present. However, this lawsuit is not unique. Just last week, a class action lawsuit against Kim Kardashian and other celebrities who promoted EtherumMax was dismissed by a federal judge. In his dismissal, judge Michael Fitzgerald noted, “While the law certainly places limits on those advertisers, it also expects investors to act reasonably before basing their bets on the zeitgeist of the moment.”
Make Smart NFT Investments
Class action lawsuits like these are not uncommon. This year’s NFT crash has left investors feeling bitter and a little cheated. Unfortunately, as judge Fitzgerald pointed out, investors need to be careful about what they buy into. Certainly, it’s unfair to be misled or given false information prior to making an investment. But, a level of scrupoulousness and discerning should be involved on the investor’s side.
The future of NFTs is still bright, despite much of the news. Investors can enjoy a passive income from NFTs, and make smart choices. Digital artwork and collectibles that don’t serve a purpose beyond bragging rights are old news.
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