A federal judge recently dismissed a class action lawsuit that alleged Yuga Labs, the company behind the Bored Apt Yacht Club collection of NFTs, colluded with several celebrities to inflate the prices of its products.
On October 1, US District Judge Fernando Olguin found the plaintiffs Adonis Real and Adam Titcher failed to show that the digital assets created by Yuga Labs, including the Bored Ape Yacht Club NFTs and cryptocurrency ApeCoin, were securities. The judge’s ruling was first reported by the Courthouse News Service last week.
The Bored Ape Yacht Club was among the most successful NFT collections, with celebrity endorsements from Justin Bieber, Madonna, Golden State Warriors point guard Steph Curry, as well as media personality and businesswoman Paris Hilton.
Real and Titcher filed the class action lawsuit in 2022, claiming that six types of digital assets sold by Yuga Labs are unregistered securities and the celebrities who promoted Yuga Labs’ products violated federal and state securities laws. The lawsuit also alleged that Yuga Labs colluded with talent agent Guy Oseary and MoonPay, a platform used to buy and sell cryptocurrency, in order to misleadingly promote and sell the NFTs and cryptocurrencies.
In addition to Bieber, Madonna, Curry, and Hilton, the lawsuit’s list of defendants also included Mike Winkelmann (the American digital artist known as “Beeple“), Reddit founder and venture capitalist Alexis Ohanian, NFT collector Amy Wu, Adidas America, Inc., as well as Sotheby’s.
Judge Olguin found that Yuga Labs’ products did not meet the Howey test, a legal framework created by the Supreme Court which requires “1) an investment of money 2) in a common enterprise 3) with an expectation of profits produced by the efforts of others” in order to label something a security.
However, the judge did side with Real and Titcher on the issue of whether the profits from the Yuga Labs digital assets would come from the efforts of others.
“In short, despite satisfying this sub-prong, the plaintiffs have failed to satisfy the other Howey prongs and therefore fail to allege that any, some, or all of defendants’ digital assets are a security,” Judge Olguin wrote.
Plaintiffs Real and Titcher have until October 10 to file a third amended complaint.
Representatives for Yuga Labs declined to comment to Courthouse News Service, and representatives for Real and Titcher did not immediately respond to a request for comment.
