Investors sue Sotheby's, Justin Bieber, Hilton among others as NFT prices crash

California, USA

A group of investors has initiated legal action against Sotheby's Holdings Inc. and numerous others concerning a 2021 auction and marketing campaign for Bored Ape Yacht Club non-fungible tokens (NFTs). The move came after a sharp decline in prices for these celebrity-endorsed collectables was reported.

In a class action lawsuit, the four main plaintiffs assert that the auction house deliberately promoted the NFTs in a misleading manner and engaged in collusion with creator Yuga Labs to artificially inflate their values.

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Sotheby's is listed as one of the 30 defendants in the lawsuit, which also implicates celebrities like Justin Bieber and Paris Hilton for endorsing the NFT collection without revealing their financial connections to it.

Massive decline reported in values of the NFTs

Presently, CoinGecko's cryptocurrency market tracker reveals that the vivid digital ape illustrations are now purchasable for as low as $52,445, a stark contrast to their previous price of over $400,000 in May 2022.

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In September 2021, Sotheby's conducted an online auction where over 100 of these NFTs were sold to a single bidder for over $24 million, exceeding the estimated $12 million to $18 million.

Fake hype created?

The revised lawsuit, initially filed in December without implicating Sotheby's, alleges that the sale was deceptive and that the auction house had been enlisted by Yuga Labs to generate interest and hype around the Bored Ape brand.

Furthermore, the lawsuit claims that Sotheby's portrayal of the undisclosed buyer as a 'traditional' collector created a false impression that the NFT market had entered the mainstream.

Sotheby's response

Sotheby's refutes the claims, asserting that they are unfounded while pledging to defend against them vigorously.

The investors are now seeking a jury trial and over $5 million in damages.

The lawsuit also implicates other companies, including Adidas and MoonPay, for conspiring to artificially inflate NFT prices.

What are NFTs?

NFTs, which transform digital collectables into unique, verifiable assets for blockchain-based trading, witnessed a surge in prices in 2021, exemplified by Jack Dorsey's tweet NFT selling for $2.9 million, a LeBron James slam dunk clip for over $200,000, and Beeple's "Everydays: The First 5000 Days" fetching a record $69 million.