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The Courts Bitcoin The Almighty Buck

Buyers of Bored Ape NFTs Sue After Digital Apes Turn Out To Be Bad Investment (arstechnica.com) 175

Posted by BeauHD from the told-ya-so dept.
An anonymous reader quotes a report from Ars Technica: The Sotheby's auction house has been named as a defendant in a lawsuit filed by investors who regret buying Bored Ape Yacht Club NFTs that sold for highly inflated prices during the NFT craze in 2021. A Sotheby's auction duped investors by giving the Bored Ape NFTs "an air of legitimacy... to generate investors' interest and hype around the Bored Ape brand," the class-action lawsuit claims. The boost to Bored Ape NFT prices provided by the auction "was rooted in deception," said the lawsuit filed in US District Court for the Central District of California. It wasn't revealed at the time of the auction that the buyer was the now-disgraced FTX, the lawsuit said.

"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 lawsuit claimed. Lawsuit plaintiffs say that harmed investors bought the NFTs "with a reasonable expectation of profit from owning them." Sotheby's sold a lot of 101 Bored Ape NFTs for $24.4 million at its "Ape In!" auction in September 2021, well above the pre-auction estimates of $12 million to $18 million. That's an average price of over $241,000, but Bored Ape NFTs now sell for a floor price of about $50,000 worth of ether cryptocrurrency, according to CoinGecko data accessed today. [...]

The amended lawsuit alleges that "[Bored Ape creator Yuga Labs] colluded with fine arts broker, Defendant Sotheby's, to run a deceptive auction." After the sale, a Sotheby's representative described the winning bidder during a Twitter Spaces event as a "traditional" collector, the lawsuit said. The lawsuit said it turned out the auction buyer was now-bankrupt crypto exchange FTX, whose founder Sam Bankman-Fried is in jail awaiting trial on criminal charges. Ethereum blockchain transaction data shows that after the auction, "Sotheby's transferred the lot of BAYC NFTs to wallet address 0xf8e0C93Fd48B4C34A4194d3AF436b13032E641F3,77 which, upon information and belief, is owned/controlled by FTX," the complaint said. Speculation that FTX was the buyer had been percolating since at least January 2023. The lawsuit alleges that Yuga Labs and Sotheby's violated the California Unfair Competition Law, the California Corporate Securities Law, the US Securities Exchange Act, and the California Corporations Code. The plaintiffs also claim that Sotheby's Metaverse, an NFT trading platform opened after the auction, "operated (or attempted to operate) as an unregistered broker of securities."
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Buyers of Bored Ape NFTs Sue After Digital Apes Turn Out To Be Bad Investment More

Buyers of Bored Ape NFTs Sue After Digital Apes Turn Out To Be Bad Investment

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  • help! (Score:5, Funny)

    by awwshit ( 6214476 ) on Thursday August 17, 2023 @07:12PM (#63776192)

    Help! I paid too much for a link to a jpeg! Its all *your* fault.

  • Always blame someone else (Score:5, Insightful)

    by Retired Chemist ( 5039029 ) on Thursday August 17, 2023 @07:13PM (#63776198)
    So, you went and bought something that clearly had no value for an inflated price and now you are looking for someone else to blame. What is worse, you may actually get the courts to give you something. Idiots should be required to accept the results of their stupidity and speculators that lose should have to accept that they were fooled.

    • Re:Always blame someone else (Score:5, Insightful)

      by bugs2squash ( 1132591 ) on Thursday August 17, 2023 @07:17PM (#63776222)

      Idiots should be required to accept the results of their stupidity and speculators that lose should have to accept that they were fooled

      That's not how being rich works though

      • You clearly are not rich. You lack ambition. Go at least for a government bailout.

      • Idiots should be required to accept the results of their stupidity and speculators that lose should have to accept that they were fooled

        That's not how being rich works though

        It "works" because the rich don't end up with their head on a pike when they abuse others for gain.

        Not quite sure when that tradition stopped. Probably when the hypocrite victim wanted to start investing in those same gains...

        • Not enough people are hungry yet.

          It's more and more of them every day, though.

          Many states would like to not even have programs like SNAP and TANF, but the feds force them, because they are much smarter and know about torches and pitchforks.

    • Re:Always blame someone else (Score:5, Interesting)

      by ewibble ( 1655195 ) on Thursday August 17, 2023 @07:56PM (#63776328)

      I am in 2 minds about it sure to me sure NFTs where dumb, really dumb and people should pay for the consequences of their dumbness.

      However people shouldn't be able to just get away with ripping off people, we are all dumb sometimes, and they should also get punished. Sotheby made money off these scams they didn't care, they got their commission. I don't think that is acceptable behavior that should be condoned by society.

      Perhaps they should be fined 3 times their commission and that should go to a charity.

      • Re: (Score:2)

        by edis ( 266347 )

        Well, it is true, Sotheby's misrepresented buyer. FTX is NOT and was NOT a "traditional investor". It's about claiming, that such hype did set foot in general public demand - not in that case.

        • Is there a fixed common definition of a traditional investor? Are brokerages excluded from it, despite that being the nature of their existence? It seems to me that an company in the business of buying and selling investment assets must fit the definition of a traditional investor.

          • Re: (Score:2)

            by edis ( 266347 )

            Well, to be exact, article repeats multiple times "traditional", while it is preceding next words "collector", "buyer", but not "investor" in particular. As this appears to be claimed of importance, the case should be examined as it is worded and reasoned in the lawsuit. At this point we are getting information already generalized for publishing. Still, the core of the claim is depicted well enough: picturing crypto speculator as traditional collector/buyer/investor is misleading.

      • Well I think NFT are a pretty clever way to automatically trade non-tangible goods like the movie rights to a novel or the right to collect royalities for a song. The same way like a credit card or mobile NFC payments with your phone and Apple/Google Wallet are a great idea because they make it easy buying a movie or a plane ticket.

        However, thinking that something is valueable because you use a certain technology to buy it, is outright stupid!

        And I'm sorry if that will hurt anyones feelings, but the people

        • NFT are inherently dumb, no matter what they represent. NFT have only one single positive attribute that other forms of transaction tracking don't have: decentralization (with all the caveats of how decentralized a network where a handful of oligarchs control most of the power actually is). Everything else (e.g. speed, automation) can be recreated in a cheaper, faster centralized fashion. The one major disadvantage of all smart contract type solutions is the lack of legal appeal. It's a feature (not a bu

    • Or to put it differently... (Score:5, Funny)

      by Roger W Moore ( 538166 ) on Thursday August 17, 2023 @07:58PM (#63776332) Journal
      ...only stupid apes buy bored apes.

    • You're completely right. But with that said, I'm still OK with the sellers getting soaked through lawsuits too. In fact, they should just keep suing each other until they all run out of money, to keep the lawyers busy and not harming legitimate people and businesses.

    • Yeah... think the lawyer is working on a % of recovery basis or retainer?

      How many things in the whole summary should make a logical person say... WTF?! BTW, that isn't 'Where are The Funds?'

  • Haha suckers realize they been had (Score:5, Insightful)

    by Rosco P. Coltrane ( 209368 ) on Thursday August 17, 2023 @07:24PM (#63776242)

    and they blame someone else for their own stupidity. What a shocker...

    Guess what: the rest of us with a couple working neurons looked at NFTs - or cryptocurrencies in general - and thought "You know what? That looks like a scam..." and gave it a hard pass.

    • and they blame someone else for their own stupidity. What a shocker...

      It's a bit of like suing after the carnival has already packed up and left town.

  • You mean to tell me that all the Bored Ape NFTs that I right-click-downloaded aren't actually worth anything?! How do I sue them for wasting my PC's storage space?

  • I feel pretty certain that Sotheby's would have covered their asses on this and put up all sorts of notices about the uncertainty of the future value of these auction items. Big auction houses like this sell lots of items that may not hold their value, so I think their lawyers know how to indemnify them. This isn't even like fraudulent artwork or wine, where the provenance may be misrepresented. The people buying these things should have known exactly what it was they were getting- a UUID tied to a block

  • As the saying goes... (Score:3)

    by djbckr ( 673156 ) on Thursday August 17, 2023 @07:41PM (#63776296)
    A fool and his money are soon parted.
  • (sarcasm, in case anyone was in doubt)

  • mind boggling (Score:4, Insightful)

    by bloodhawk ( 813939 ) on Thursday August 17, 2023 @07:46PM (#63776312)
    They were always a scam, but the only reason they bought into the scam was in the hope for the bigger fool theory so I don't have any sympathy as they expected even more idiots would pay even higher prices for these. It baffles the mind that anyone is even willing to pay $1 for what is essentially a link to a gif.

    • I wouldn't say NFT are a scam, but I have never seen NFTs used for anything but scams.

      • Re:mind boggling (Score:4, Insightful)

        by swillden ( 191260 ) <shawn-ds@willden.org> on Friday August 18, 2023 @10:32AM (#63777882) Journal

        I wouldn't say NFT are a scam

        Why not? Can you point to any possible use of NFTs that isn't scammy?

        The only vaguely-reasonable example I've seen is that of ownership titles, like those used for real estate and vehicles. In theory, NFTs could be used to track ownership of physical property while avoiding the overhead of a government-operated registry. In practice, titles are really only relevant when there are disputes over ownership, so the real value of any titling system is in how well it can interoperate with the mechanism used to resolve disputes. As long as the final arbiters of disputes are government-operated courts, it's hard to see how any titling system can work as well as a government agency.

        And courts are always going to be the final arbiters of disputes. People natter on endlessly about the power of smart contracts to self-execute, obsoleting expensive, slow legalistic processes, but the fact is that smart contracts suck. Their fundamental problem is that they're written in code that executes on a computer. Code simply cannot model the real world accurately, because the real world is too messy, too complex, to be boiled down to a simple set of logical statements. There will always be corner cases that the programmer didn't anticipate, ways in which strictly executing the contract as written would be unfair and would violate contract law, so there will always be a need for recourse to the courts, where a human judge can examine the totality of the situation and make a decision consistent with law and fairness -- and one that is enforced by the state.

        As for intellectual property, which is what NFTs are allegedly used for, they simply don't work at all for that case, because IP is different from physical property. It's far more complex and fuzzier, which is why BYAC and other vendors of NFTs actually retain ownership of the IP and instead define a nebulous, unenforceable and, in a word, scammy, notion of "ownership" which has little to no legal meaning. And if the problem with using NFTs to manage physical property is unanticipated complexity, then the far trickier world of intellectual property makes them completely inappropriate.

        So... if they don't work for physical property and they don't work for intellectual property as normally, legally, defined, what do they work for? Scams. That's it, AFAICT.

  • I saw this and thought it sounds exactly like that $2M Super Mario cartridge sale and equally stupid valuations on Pawn Stars where the buyer, the seller and the valuer all appeared to be working together to inflate prices and get publicity. I just did a search for WATA and sure enough that exact sale is also involved in a lawsuit:

    https://www.videogameschronicl... [videogameschronicle.com]

    • Re: (Score:2)

      by DrXym ( 126579 )

      Retro gaming valuation and auction services have long been exposed as a scam. People associated with them have been caught auctioning their own games at stupid prices just so they can put out press releases proclaiming the skyrocketing value of games. And then the idiots come swarming in to use the valuation services and to buy games and create a speculative derp bubble.

  • Auction buyer: Someone who BUYS things at an auction. FTX was the SELLER of the NFTs. WTF?
  • Bored Ape NFT's still have a mind boggling value of tens of thousands of dollars.

    • No they don't. They have a theoretical value tied to the theoretical value of an imaginary currency. This value only exists until somebody attempts to realise it into actual money, at which point it evaporates because anybody who isn't a fucking idiot or a fraudster is steering well clear. It's essentially like when Amazon has something listed at a ridiculous price that nobody is ever going to pay, which they sometimes do when something is out of stock but they want to keep their inventory list looking good

      • But if there is an idiot willing to pay for it, doesn't it fit your definition of "what somebody is willing to pay"?

        • Yes, but there is no evidence that there currently is anybody willing to pay it. If there were this lawsuit probably wouldn't exist. The people bringing the lawsuit are the ones at the bottom of the pyramid, all those above made their cash by finding enough marks willing to pay for this nonsense. These people thought they could do the same but have been proven wrong, hence their 'assets' have no value.

          It's the same with the supposed value of all crypto nonsense. It has a small value while it can be used for

    • Re: (Score:2)

      by DrXym ( 126579 )

      Being the last moron in the chain who bought an NFT for 10,000s doesn't mean that's their value if there is no one stupid enough to pay that any more.

    • Re: (Score:3)

      by ukoda ( 537183 )
      The mind boggling part is that anyone would buy one. I do have to ask but am I the only one who things the Bored Ape NFTs are just plain ugly?

      I used to buy into the argument that anything can be art if you call it art, until I saw a Bored Ape NFT. No, just no!

  • If you are an investor, and you have your lawyers write something like "...Sotheby's auction duped investors by giving the Bored Ape NFTs "an air of legitimacy... to generate investors' interest and hype around the Bored Ape brand," then you MUST be an absolute moron who has no business investing in anything. Bury your money in a jar in the backyard or stuff it into your mattress... you'll get no interest or dividends, but you clearly lack any understanding of how to pick a wise investment and your capitol

  • Is because one of the major loopholes in the art market for the purpose of tax evasion was closed. A bunch of rich people thought they could have made the closing of that loophole by purchasing nfts instead of actual physical paintings and art. Eventually someone in the government just pointed out that no, art is art regardless of the medium and the loophole is still closed. As soon as that happened all the rich people exited the market since it wasn't a viable tax Dodge anymore.

    If you ever wonder why th
  • How much is that gorilla in the window [worth]? Two cents!

  • Sorry, folks (Score:3)

    by Opportunist ( 166417 ) on Friday August 18, 2023 @01:02AM (#63776784)

    The legal system is here to protect you from others' malice, not from your own stupidity.

    At least it shouldn't be.

  • Well duh (Score:3)

    by DrXym ( 126579 ) on Friday August 18, 2023 @02:43AM (#63776940)

    Anyone with a functioning brain should have realised that "investing" in a randomly generated image was a fucking moronic idea. Doesn't excuse people operating this massive scam or any celeb / influencer who chose to front it.

    • Re: (Score:2)

      by HBI ( 10338492 )

      I think it's pretty amazing I lived to see the people who slabbed 'investment grade' collectible coins with ambiguous grading and tried to turn them into commodities were actually honest businessmen in comparison to these jokers.

  • then sue the casino when you lose ??

    is that how this works ??

    • Many people do exactly that with casinos. These idiots aren't the first to refuse to take responsibility for their bad decisions.
  • Someone bought a worthless hype item hoping to sell to a bigger sucker, but upon realizing they were the end of the sucker chain, sue the seller? I am certain Sotheby's did not guarantee anyone that their investment will appreciate. If they could, they'd have sold bonds, not NFT's. NFT's, just like the rest of crypto, if magic beans which only have value if you can find another sucker to buy it. Earth has limited population, and only some of that population falls into the addressable market for crypto, so e

  • "...plaintiffs say that harmed investors bought the NFTs "with a reasonable expectation of profit from owning them."

    Hahaha

    • Yeah, given how many people reasonably expected them to be worth exactly nothing, I don't think the argument is going to go very far.
  • and it turns out to be shit - now you want your money back.

  • And that's about what they are worth.

    Suckers...

  • So they were indescribably stupid to begin with, and they doubling down now? The judge ought to impose a heavy fine on them. For their inveterate stupidity.

  • So you bought something and greedily thought you'd be on the cutting edge and get rich but didn't? Tough shit.

    I can sell a rock from my backyard for a million dollars. If you buy it then good on me and it was your choice.

  • Morons of the 2nd order (Score:3)

    by gweihir ( 88907 ) on Friday August 18, 2023 @11:34AM (#63778082)

    Not only stupid, but also in denial about their own stupidity and convinced somebody else _must_ be at fault. Auctions of this types come with assurance of the item being genuine, but not of it having any value whatsoever. You bet, you win, it is your problem.

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This is clearly another case of too many mad scientists, and not enough hunchbacks.

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