Sotheby’s Facing Class-Action Lawsuit Alleging Deceptive Practices in NFT Sale

Sotheby’s, the renowned auction house, has been added to the list of defendants in an ongoing class-action lawsuit. The suit alleges that Sotheby’s, along with the creators of Bored Ape Yacht Club (BAYC) and several A-list celebrities, engaged in deceptive practices in relation to the marketing and sale of non-fungible tokens (NFTs).

According to the amended complaint filed with the Central District Court of California, the plaintiffs claim that Sotheby’s colluded with Yuga Labs, the creator of BAYC NFTs, to artificially inflate the value of these colorful digital assets. Specifically, the allegations focus on an online auction held in September 2021, where Sotheby’s sold 101 BAYC NFTs for $24.2 million, surpassing the presale estimate and setting a new record for crypto art.

The lawsuit accuses Sotheby’s of deceptive practices, claiming that the auction house misrepresented the market for BAYC NFTs as having crossed over to a mainstream audience. The plaintiffs argue that Sotheby’s created this impression through its promotion leading up to the sale. Additionally, the suit alleges that Sotheby’s downplayed the possibilities of an NFT market bubble.

The lawsuit also claims that Sotheby’s continued to generate hype after the sale. It is alleged that Max Moore, Sotheby’s head of contemporary art auctions, falsely stated on Twitter that the winning bidder on the BAYC NFT lot was a “traditional” art collector, when in reality it was the now-defunct cryptocurrency exchange FTX.

The class-action lawsuit, initially filed in December, includes not only Sotheby’s but also Yuga Labs and several celebrities, including Madonna, Paris Hilton, Justin Bieber, Jimmy Fallon, and Mike “Beeple” Winkelmann. The defendants are accused of defrauding investors by artificially boosting NFT prices through paid celebrity endorsements.

The plaintiffs are seeking compensation of more than $5 million. Sotheby’s has stated that the allegations in the lawsuit are baseless and that it is prepared to vigorously defend itself.

Overall, the lawsuit alleges that Sotheby’s engaged in deceptive practices with Yuga Labs to inflate the value of BAYC NFTs, misleadingly portraying the market as mainstream and downplaying the risks of an NFT bubble. The case is ongoing in the Central District Court of California.