What Happened: The Bored Ape Yacht Club NFTs’ floor price sank 18 percent to 23.228 ETH (approx $38718.99) today, following news that auction house Sotheby’s is the latest business to find itself embroiled in a class-action lawsuit filed by four investors in the digital assets against the project’s creator and parent company, Yuga Labs.
The plaintiffs are reportedly seeking a jury trial and more than $5 million in damages.
According to news outlets, the plaintiffs accused Sotheby’s of “misleadingly promoting” the project and conspiring with Yuga Labs to artificially inflate the prices of the BAYC NFTs. Since the project’s launch, some 10,000 NFTs representing cartoon-like primates have been created and distributed.
The auctioneer was included as a defendant in the lawsuit alongside a slew of household names on August 4, such as reality TV star and ‘it’ girl Paris Hilton, pop star Justin Bieber, and sportswear giant Adidas.
In 2021, Sotheby’s sold 100 BAYC tokens to a lone buyer for $24 million, surpassing the pre-sale estimate of $12 million to $18 million. The investors have branded the sale as deceptive, claiming that the auction house was hired by Yuga Labs to “generate investors’ interest and hype around the Bored Ape brand.” The auction house denies the accusations.
Defendants such as Bieber and Hilton have also been accused of promoting the NFT collection without disclosing the financial gain they received from the project, as well as faking interest around the BAYC brand for their own monetary benefit.
Moreover, investors accuse Yuga Labs of secretly conspiring with crypto infrastructure company MoonPay to settle their “celebrity cohorts” and hoodwink audiences into believing that the hype surrounding BAYC’s project was organic, as opposed to the result of a paid promotion.
The lawsuit, first filed in December last year, was amended this month to add Sotheby’s, which had not previously been named as a defendant in the case. Both Yuga Labs and Sotheby’s have refuted the allegations, stating that the investors’ claims arrive “without merit or factual basis.”
The Jing Take: The NFT market’s decline has loomed over the crypto community since its bull run ended in the last quarter of 2022.
Despite investors remaining bullish on the trade, NFT prices have continued to collapse, with demand for digital assets subsequently drying up as a result of declining confidence amid scandals like the bankruptcy of cryptocurrency exchange FTX.
According to cryptocurrency market tracker CoinGecko, the cartoon ape-inspired tokens could set an investor back as much as $400,000 in May 2022. As of today, the average floor price for a BAYC token sits at $40,673, down 89.8 percent.
As one of the most prolific and first movers in the market, BAYC earned a reputation as a blue chip PFP (profile picture) project during a period of NFT mania in 2021. But the collection has lost steam over the past 18 months, and struggled to rebound.
While Sotheby’s denies the lawsuit’s claim that it misleadingly promoted the BAYC NFTs to ignite hype, the role it has played in bringing the BAYC project to public attention, and its expansion in the NFT space, are significant.
In October 2021, the rare, gold-furred Bored Ape ‘#8817’ became the most expensive BAYC NFT ever sold, raking in $3.4 million via Sotheby’s Metaverse digital art platform. The sale made crypto history, and contributed to digital asset trades totaling $10.67 billion in Q3 of 2021, as reported by DappRadar.
After establishing its Web3-centric marketplace in 2021, Sotheby’s grew to become a popular port of call for digital creators looking to sell NFTs. Earlier this year the auction house launched its on-chain, peer-to-peer secondary platform for tokens, which aims to further spotlight artists and compete against other secondary channels in the market.
In May this year, Artnet reported that Sotheby’s had generated north of $100 million in NFT sales.
If successful, the lawsuit would tarnish the reputations of those found guilty. But whatever the outcome, the future of the NFT market depends on major overhauls, improved promotional transparency, and better regulatory standards to avoid a decline into obscurity.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.