On the heels of being sued for his role in promoting failed crypto exchange FTX, Golden State Warriors star Stephen Curry faces a new lawsuit for promoting the NFT series Bored Ape Yacht Club. Like in the FTX litigation, Curry’s role as both a promoter and investor could play a key role in determining his potential liability.
Last Friday, two investors who purchased ApeCoin tokens sued Yuga Labs, the parent of the Bored Ape Yacht Club series, along with company executives, board members and a group of promoters. The investors hope for Adonis Real et al. v. Yuga Labs, Inc. et al. to be certified as a class action on behalf of all who purchased Yuga’s NFTs or ApeCoin tokens between Apr. 23, 2021 and now. The 95-page complaint, which was filed in a Los Angeles federal court, raises claims for unfair competition, unjust enrichment, violations of consumer law, aiding and abetting, civil conspiracy and multiple breaches of federal securities law. It seeks a jury trial and at least $5 million in damages.
The list of “promoter defendants” is extensive. In addition to Curry, Madonna, Paris Hilton, Serena Williams, Justin Bieber, Snoop Dogg, DJ Khaled, Gwyneth Paltrow and Jimmy Fallon (among others) are named. They’re described as company promoters who solicited sales of Yuga securities to the public. The core problem, the complaint maintains, is that Yuga Labs allegedly conspired with MoonPay, a company that facilitates the sale of digital assets, and another defendant to “discreetly pay their celebrity cohorts … without disclosing it to unsuspecting investors.”
The complaint suggests that Ape DAO board member Amy Wu, who until November led FTX Ventures (FTX’s venture capital arm), “utilized her relationships at crypto exchange FTX to recruit world champion athlete defendant Curry to solicit sales of the BAYC collection of NFTs.” None of the “celebrity endorsements” of BAYC NFTS, the complaint contends, “disclosed the underlying financial interests and relationships involved.” FTX Ventures was an investor in Yuga Labs.
On Feb. 18, 2022, the complaint charges, Curry and an ice sculpture of a Bored Ape appear in an FTX commercial. “Curry can be seen brushing off flakes of ice from the unmistakable features of the BAYC NFTs,” the complaint summarizes. The commercial allegedly appeared on FTX’s Twitter account with the teaser, “When learning about crypto, you’ll be anything but bored.” The plaintiffs claim they “saw the off-brand promotion” featuring Curry and “were induced to purchase and/or continue to hold Yuga securities as a result of this misleading promotion.”
Curry’s involvement in an FTX ad run on YouTube on Mar. 29, 2022, is also described by the complaint as problematic. Although the complaint concedes the commercial was for FTX, not Yuga Labs, it argues “there were multiple not-so-hidden references to the BAYC collection of NFTs.” Those “references” include Curry working on an ice sculpture of an ape and the ad “did not include any disclosure or disclaimer concerning the connection between FTX and Yuga via Defendant Wu, who had significant financial interest in both companies.” This arrangement, the complaint asserts, duped “uninformed investors to invest into digital assets like the BAYC NFTs, while at the same time giving a ‘wink’ disclaimer that this was not financial advice to provide Curry with plausible deniability regarding his promotion of the Yuga Financial Products.”
Bored Ape Yacht Club was one of the first prominent NFT collections, as individual NFTs set records by selling for millions of dollars after being created in April 2021. According to Cryptoslam! data, original BAYC items have tallied more than $2.5 billion in all-time sales, not including spinoffs such as Mutant Ape Yacht Club and Bored Ape Kennel Club. The so-called Yugaverse also has its own cryptocurrency, ApeCoin. The token released to much fanfare in March, but a downturn in crypto values has cut the trading value of the coin to roughly 50% of its initial price. Individual BAYC NFTs, meanwhile, are still regularly selling for more than $80,000
As Sportico previously reported, Curry’s fondness for the Bored Ape NFT is well documented. He reportedly paid $180,000 for the No. 7990 unit of this NFT line. He then displayed it on Twitter and sent a selfie in the BAYC Discord chat.
Curry has also shown an enthusiasm for several other crypto projects. He reportedly bought a Rumble Kong NFT for nearly $30,000 and teamed with the company for a digital sneaker drop along with Under Armour. He also launched his own set of 2,974 NFTs (recognizing his status as the NBA’s 3-pointer record holder) on FTX’s platform, with 100% of his profits reportedly going to an Oakland-based non-profit. It’s currently unclear how FTX’s bankruptcy will ultimately impact NFT holders’ access to those items.
In a statement shared with Sportico’s sister publication, Variety, Yuga Labs rebuked the lawsuit as relying on “opportunistic and parasitic” claims. The company, which will have an opportunity to answer the lawsuit in a court filing and seek its dismissal, maintains the case is “without merit.” Curry, like all the 37 defendants, will also answer the complaint, contest the accuracy of the accusations and alleged factual statements and profess his innocence.
One challenge for the plaintiffs is that courts have been skeptical of lawsuits that attempt to hold spokespersons and endorsers liable for a company’s alleged wrongdoing. In a key case in 2014, the U.S. Court of Appeals for the Ninth Circuit ruled against the Federal Trade Commission, which argued that retired MLB player Steve Garvey was responsible for deceptive claims by a weight loss supplement he endorsed. The court held that in the absence of proof Garvey possessed “actual knowledge” of meaningful misrepresentations or was “recklessly indifferent to the truth or falsity of any representations he made,” he is not liable as an endorser.
One possible difference with celebrities who endorse crypto-related products is that, in some cases, they are also investors. They might have greater access to company information than an ordinary person and thus could be regarded as having a heightened responsibility to safeguard the public from fraudulent or exploitative acts. On the other hand, if these celebrities lost money themselves, it would suggest they were not “in the know” and were, like others, victims.
The case has been assigned to Judge Fernando Olguin. Attorney John Jasnoch from Scott+Scott Attorneys at Law in San Diego signed the complaint on behalf of the investors.
As Variety reported, a federal judge in Los Angeles dismissed a case last week against Kim Kardashian, Floyd Mayweather and other celebrity promoters of cryptocurrency company EthereumMax on grounds that investors should “act reasonably before basing their bets on the zeitgeist of the moment.”