A group of investors have filed a lawsuit against Sotheby’s over accusations that the auction house took part in “misleading promotion” to boost the profile of Bored Ape Yacht Club non-fungible tokens (NFTs), which plaintiffs allege was a scheme to defraud investors.
Sotheby’s was named as a defendant in a class action lawsuit filed in California last week alongside Yuga Labs, the creators of the Bored Ape Yacht Club NFTs. In the lawsuit, a group of investors claim they were misled about the NFTs, which feature colourful illustrated apes produced by an algorithm and peaked in value in late 2021. In September of that year, Sotheby’s sold 101 Bored Ape Yacht Club NFTs in an online auction for $24m against a $12m to $18m pre-sale estimate.
The lawsuit claims Sotheby’s played a part to “deceptively promote the artificially inflated” value of the NFTs. Sotheby’s endorsement of the NFTs helped Yuga Labs gain a sense of legitimacy among traditional collectors, according to the lawsuit, while attracting a younger audience. After the sale Max Moore, Sotheby’s head of contemporary art auctions, allegedly said the NFTs had been purchased by a traditional collector, though the complaint filing claims the images were purchased by FTX, the cryptocurrency exchange that has since crumbled.
“Sotheby’s representations that the undisclosed buyer was a ‘traditional’ collector had misleadingly created the impression that the market for BAYC NFTs had crossed over to a mainstream audience,” the plaintiffs’ legal team wrote in the complaint. The filing alleges Sotheby’s “misleading promotion” had “successfully induced additional purchases” of the NFTs.
In a statement, the auction house called the allegations “baseless”, adding that “Sotheby's is prepared to vigorously defend itself”.
Stars like Paris Hilton, Justin Bieber, Jimmy Fallon, Madonna and even Mike “Beeple'' Winkelmann, the digital artist behind the most valuable NFT ever sold at auction, were also named as defendants in the lawsuit. A previous iteration of the complaint filed last year did not include Sotheby’s. Since 2021, prices for Bored Ape Yacht Club NFTs have fallen substantially amid what some have dubbed a “crypto winter”.