I was skeptical about cryptocurrency and was utterly baffled by the appeal of NFTs. The former seemed risky and the latter felt very much like a speculative bubble driven by hype in which the underlying entity being bought and sold had no intrinsic value. So I was not surprised by the collapse of various cryptocurrency endeavors like FTX and even less surprised by the recent lawsuit filed against Sotheby’s auction house, accusing them of fraud in inflating the value of the ugly Bored Ape BFT and using celebrities to hype it.
A group of investors is suing Sotheby’s Holdings Inc. and others over a 2021 auction and promotion of Bored Ape Yacht Club non-fungible tokens (NFTs) following a collapse in prices for the celebrity-endorsed collectibles.
The four named plaintiffs in the class action lawsuit allege that the auction house “misleadingly promoted” the NFTs and colluded with creator Yuga Labs to artificially inflate their prices.
Sotheby’s is among 30 defendants named in the lawsuit, with celebrities like Justin Bieber and Paris Hilton also accused of promoting the NFT collection without disclosing their financial links to it.
According to cryptocurrency market tracker CoinGecko, the colorful digital illustrations of apes can now be bought for as little as $52,445. As recently as May 2022, the cheapest would have cost collectors over $400,000.
In September 2021, Sotheby’s sold over 100 of the NFTs to a single buyer in an online auction for more than $24 million, beating the pre-sale estimate of $12 million to $18 million.
The Bored Ape Yacht Club, a collection of 10,000 NFTs hosted on the Ethereum blockchain, launched in April 2021. The images feature cartoon apes with computer-generated features and accessories, such as gold fur, laser eyes, “hip hop clothes,” a “sushi chef” headband or a sailor hat.
The lawsuit against their creator also names several other companies involved in promoting the NFTs, such as sportswear giant Adidas, claiming they conspired in a “vast scheme” to artificially inflate prices.
Crypto payments company MoonPay is meanwhile also accused of market manipulation. The lawsuit says that Yuga Labs used MoonPay to “discreetly pay their celebrity cohorts” and make interest in the NFTs “appear to be organic” rather than the result of a paid promotion.
What shocked me was the sentence that a Bored Ape NFT “can now be bought for as little as $52,445”. I would have expected it to be close to zero.
There seems to be a steady drop in the price of NFTs in which “the average price of NFT token sales fell by a staggering 92% from May 2022 to February 2023, from $3,894 to $293.”
I tend to be very wary of crazes that promise to make money quickly. Partly it is because I am risk averse and partly because my needs are simple and I have no need or desire to accumulate a lot of money, which seems to be a major motivator for people who buy into the hype of things like cryptocurrencies and NFTs.