Sotheby’s has been added as a defendant in a group of investors’ ongoing lawsuit over the house’s promotion of NFTs sold by the Web3 company Yuga Labs, which is best known as the parent company of the viral collection Bored Ape Yacht Club (BAYC).
Initially, the class action lawsuit focused solely on Yuga Labs. The suit centers around allegations that it misled investors in the marketing of the BAYC digital assets.
In an amendment to the original legal filing dated last Friday, the investors claim that Sotheby’s was an active player in “misleadingly” promoting the BAYC NFTs in the results of its public sales. The suit alleged that the auction house attempted to “manipulate” NFTs in the popular Bored Ape Yacht Club collection.
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According to the Art Newspaper, which first reported news of the updated lawsuit, Sean Masson, an attorney representing the plaintiffs, said that the 250-year-old auction house’s “stamp of approval” played a role in “the deceptive promotion of the NFT collection as a legitimate investment.”
In court documents, investors argued that Sotheby’s misrepresented the buyer of a BAYC NFT collection linked to an affiliate of the fallen crypto company FTX in 2021, creating misleading information around the group of NFTs as stable investments. In September 2021, when the house held an online sale of 101 Bored Ape Yacht Club NFTs, the grouping went to an anonymous buyer for £24.4 million. The results surpassed the house’s presale estimates of $12 million–$18 million.
Max Moore, a Sotheby’s NFT specialist based in Hong Kong, described the anonymous buyer of a popular BAYC NFT as a “traditional buyer” via social media when promoting the sale results. But the filing stated that the NFT collection is actually believed to have been purchased by an affiliate of FTX Ventures.
Moore’s statements online on behalf of Sotheby’s “misleadingly created the impression that the market for BAYC NFTs had crossed over to a mainstream audience,” the filing stated. (FTX, whose founder Sam Bankman-Fried is facing fraud charges, was also a backer of Yuga Labs fundraising in 2022.)
The lawsuit’s scrutiny of Sotheby’s representations of its digital asset sales comes as the house scales back its NFT-related operations. In July, ARTnews reported that an estimated 10 senior employees who worked on NFT sales had been laid off since April, and other staffers from Sotheby’s Metaverse have left the company. Meanwhile, financial regulators in the US and Europe have raised increasing alarm over the marketing of digital assets.
The staff cutbacks followed a period of turbulence for the NFT market as crypto lost roughly two-thirds of its value from its 2021 peak. Still, sales from liquidated crypto companies are continuing apace. In June, the auction house generated $11 million from the bankruptcy sales of Three Arrows Capital, a since-disbanded cryptocurrency hedge fund that was based in Singapore.
A representative for Sotheby’s described the allegations in the suit as “baseless,” adding that the house is “prepared to vigorously defend itself.” A representative for Yuga Labs could not immediately be reached for comment.