NFT: Has Yuga Labs cheated its investors? The class action lawsuit that can hurt

The SEC in a dilemmaYuga Labs is one of the biggest successes in the field of non-fungible tokens, the famous NFT. The Bored Ape and CryptoPunks collections are driving the counters crazy and even arouses desire. But after the fall of the crypto market and thus the price of these NFTs, some owners consider themselves to be wronged and would like to compete with the parent company. A law firm took up the subject and is considering a collective trial. But the US stock market (SEC) police officer is hesitant to position himself. Challenges and prospects.

Investors May Be Tricked by Yuga Labs

Scott + Scott is an international law firm with offices in the United States and Europe. The teams are specialized in consumer protection, shareholder rights or securities disputes. On July 12, they published on their blog a call for testimonials to possibly a class action against Yuga Labs.

The company hits hard on the American startup and the words chosen are explicit. Here’s an excerpt:

“Yuga Labs inappropriately encouraged the community to buy Bored Ape Yacht Club and the APE token associated with the project. (…) Promoters and celebrities have been used to inflate the price for unsuspecting investors. retail investors were left with tokens down more than 87% from the high price on April 28, 2022. »

Indeed, it is not only about NFT but also tokens MONKEY. So, on the one hand, there would be a society that promote images and tokens, driving up the price and reselling everything on the backs of a poor community of buyers gullible. The famous Pump and dump, a classic move in crypto. But the situation is far from that simple.

First, it’s not Yuga Labs who decided to issue tokens. Rather, it is the DAO, ie the autonomous organization of the owners of NFT. It is therefore difficult to accuse him. Also regarding this Pump and Dump accusation, no one left the project with the box office. The price of the token only followed the general decline of the markets. It will therefore be difficult to prove something along those lines. But the biggest problem in this case will be to DRY that she must intervene.

Bored Ape manager jokes about people complaining after ‘buying from the top’ – Source: Twitter

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But the reality is much more complicated for the SEC

Indeed, what is an NFT? If it’s a digital artwork, the SEC has no authority over it. Brian Fyrea law professor at the University of Kentucky explains why:

“I see very little chance that the SEC will want to step into this and… characterize this” [les NFT] as security. (…) I think they will withstand tooth and nail. (…) Because that would open a Pandora’s box for them and force them to regulate all kinds of other things that they don’t want to regulate. »

The SEC doesn’t really want to regulate the art market and has no intention of starting NFTs! If you buy a painting hoping for added value, will you file a complaint if the painter’s price drops? On the NFT side, there’s not really a chance to see one procedure to succeed. And on the side of the APE tokens, we also go in circles. Brian Fyre continues:

“The crazy thing is, how do you trade with inside information unless you’re doing it with something that’s a security traded on an exchange?”

In short, to be able sue Yuga Labsshould the SEC first position on the nature of Coins MONKEY and possibly NFT. And decides to include them in the security category, which it has refused to do for years. It is more likely that the SEC “press the key” » and use terms like “electronic fraud and money laundering” » to characterize the facts. But one day it will be necessary to build a regulatory framework for its unidentified financial goals because: the fashion doesn’t seem ready to pass.

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