A proposed class-action lawsuit alleges that Yuga Labs “inappropriately induced” the community to buy Bored Ape Yacht Club non-fungible tokens (NFTs) and the project’s affiliated ApeCoin (APE) token. Law firm Scott+Scott claims that Yuga Labs promoted a chance at huge returns on investment to “unsuspecting investors.”
The proposed class action was published on July 21 by law firm Scott+Scott, demanding that Yuga Labs “inflate the price” of the BAYC NFTs and the APE token by using celebrity promoters and endorsements.
It also demands that Yuga Labs endorse the growth projections and chance for huge returns on investment to “unsuspecting investors.”
The law firm is seeking squeezed investors who suffered losses on BAYC NFTs and Apecoin between April and June of this year.
APE surged to its all-time high of $26.70 before dropping roughly 82.5% to $4.66 at the end of June, while the floor price went from 151.5 Ether (ETH) down to 92.9 ETH during this timeframe.
The community appears to be relatively unfazed by the anticipated lawsuit. User @briann6211 emphasized an interesting point: Yuga Labs “never created a token… Apecoin DAO created a token which was then adopted” by the firm. Quite a lot of members also noted that the Apecoin tanked after a free airdrop to BAYC holders, while the broader market was also suffering from a sharp downturn at the time.
If the lawsuit eventually gets taken to court, it appears that Scott+Scott will need to prove that Yuga Labs and its celebrity promoters failed to disclose their paid advertisements, as they are legally required to do so.
As the law firm is also claiming a pump and dump occurred, it would need to prove that Yuga Labs engaged in such practices, which may difficult given the strength of Yuga Labs’ projects.
Pump and dumps, or rug pulls usually imply that a project has dumped artificially inflated assets on a community before abandoning the project altogether.
The nature of Apecoin and BAYC NFTs may also be tricky, as the law firm may have to argue that they were promoted as investment contracts under the category of unregistered securities.
Cointelegraph has reached out to Yuga Labs for comment on the proposed lawsuit, but is yet to hear back from the company.
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