Sotheby’s is the latest addition the list of defendants in an ongoing class-action lawsuit over an alleged scheme to bilk investors in non-fungible tokens. Plaintiffs accuse the house, alongside the creators of Bored Ape Yacht Club (BAYC) and a pack of A-list celebrities, of deceptive practices relating to their marketing and sale of NFTs, according to an amended complaint filed with the Central District Court of California on August 4.
The suit claims the auction house colluded with Yuga Labs, creator of BAYC NFTs, to allegedly inflate the value of the colorful NFTs of illustrated apes, which were among the most sought-after digital assets before the crypto market crashed last year.
The allegations revolve around an online auction that took place in September 2021, where Sotheby’s raked in $24.2 million for the sale of a lot featuring 101 BAYC NFTs, far exceeding the presale estimate of $12 million to $18 million and setting a new record for crypto art at the time.
However, in its promotion leading up to the sale, the auction house allegedly claimed that legacy art collectors had begun tapping NFTs, part of what the plaintiffs characterize as an effort to build up an aura of legitimacy to the digital tokens. The suit accuses Sotheby’s of being “deceptive,” alleging that the house had “misleadingly created the impression that the market for BAYC NFTs had crossed over to a mainstream audience.” The plaintiffs also accused the house’s representatives of downplaying the possibilities of an NFT market bubble.
Sotheby’s continued to drum up the hype after the sale, the suit claims. Max Moore, Sotheby’s head of contemporary art auctions, allegedly revealed in a Twitter Space conversation on September 9, 2021, 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, according to Ethereum blockchain transaction records.
FTX spiraled from being the world’s third-largest centralized cryptocurrency exchange in mid 2021 to filing for Chapter 11 bankruptcy protection in November 2022.
Michael Bouhanna, the house’s co-head of digital art, told after the 2021 sale “a growing number of traditional art buyers getting interested in NFTs,” but Sotheby’s did not disclose the identity of the buyer.
“The allegations in this suit are baseless, and Sotheby’s is prepared to vigorously defend itself,” Sotheby’s said in a statement to Artnet News.
The lawsuit, which was initially filed in December, also names Yuga Labs and A-listers including Madonna, Paris Hilton, Justin Bieber, Jimmy Fallon, and Mike “Beeple” Winkelmann as defendants accused of defrauding investors. The suit alleges Yuga Labs made paid celebrity endorsements appear organic, which artificially boosted NFT prices.
The plaintiffs are seeking compensation of more than $5 million before costs and interest.
The case is no
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