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Over 40 companies and celebrities have found themselves on the receiving end of a lawsuit after endorsing Yuga Labs’ ever popular NFT project BAYC.
Justin Bieber, Snoop Dogg, Paris Hilton, Jimmy Fallon, Madonna, Serena Williams, Post Malone, and Diplo are among the names dragged into the case.
Filed by John T. Jasnoch of Scott+Scott Attorneys at Law LLP in the Central District of California, the class-action lawsuit was submitted on 8 December 2022. It claims that Yuga Labs used celebrities to misleadingly promote their NFTs without complying with disclosure requirements.
“This case epitomizes these concerns as it involves a vast scheme between a blockchain start-up company, Yuga Labs, Inc. (‘Yuga’), a highly connected Hollywood talent agent (Defendant Guy Oseary), and a front operation (MoonPay), who all united for the purpose of promoting and selling a suite of digital assets,” the document states.
Guy Oseary is a talent manager who recruited the celebrities and spearheaded the scheme with Yuga Labs to pay them for endorsements through crypto firm Moonpay. Oseary’s VC fund Sound Ventures was an early investor in Moonpay.
“The truth is that the Company’s entire business model relies on using insidious marketing and promotional activities from A-list celebrities that are highly compensated (without disclosing such), to increase demand of the Yuga securities by convincing potential retail investors that the price of these digital assets would appreciate,” the complaint adds.
The lawsuit claims the celebrities misled their followers to buy BAYC NFTs, who ended up with “losing investments at drastically inflated prices.” Yuga Labs’ token Apecoin was consequently boosted too, according to the suit.
“Oseary, the MoonPay Defendants, and the Promotor Defendants each shared the strong motive to use their influence to artificially create demand for the Yuga securities, which in turn would increase use of MoonPay’s crypto payment service to handle this new demand,” the complaint states.
“At the same time, Oseary could also use MoonPay to obscure how he paid off his celebrity cohorts for their direct or off-label promotions of the Yuga Financial Products.”
The lawsuit highlights the importance of DYOR in the industry. Whilst endorsements suggest a level of authenticity, it does not determine true value.
Even beyond the NFT space, endorsements alone are not enough. Most recently, crypto giant FTX collapsed, despite Singapore sovereign fund Temasek being a key backer. Amber Group, which has Temasek as the biggest investor, also appears to be in trouble too. If 2022 has taught us anything it’s that understanding your investments is essential for success in this industry.