A proposed class action lawsuit alleges that Yuga Labs “inappropriately urged” the community to purchase Bored Ape Yacht Club’s non-fungible tokens (NFTs) and the project’s ApeCoin (APE) token.
The proposed class action lawsuit was published by law firm Scott + Scott on Thursday, alleging that Yuga Labs used celebrity promoters and endorsements to “inflate the price” of BAYC NFTs and the APE token.
It also claims that Yuga Labs has promoted growth prospects and the opportunity for huge returns on investment for “reassuring investors:”
“After selling millions of dollars in fraudulently promoted NFTs, YUGA LABS launched Ape Coin to further corrupt investors.”
“Once it was revealed that the touted growth was based entirely on continued promotion (as opposed to actual utility or underlying technology), retail investors were left with tokens that lost more than 87% from the inflated price hike on April 28, 2022,” he added.
The law firm is currently looking for affected investors who incurred losses in BAYC NFTs and Apecoin between April and June of this year.
During this time frame, APE climbed to an all-time high of $26.70 before declining nearly 82.5% to $4.66 at the end of June, while the lowest price fell from 151.5 Ether (ETH) to 92.9 Ethereum.
The community appears to be relatively unfazed by the proposed lawsuit, with BAYC hodler SoapBoxCar suggesting via Twitter on Sunda that a group of people were outraged by their purchase from above and “taken back.”
User briann6211 also highlighted the interesting point that Yuga Labs “never created a token… Apecoin DAO created a token that was then approved” by the company. Several members also noted that Apecoin fell after a free airdrop for BAYC holders, while the broader market was also experiencing a severe downturn at the time.
If the lawsuit eventually goes to court, it looks like Scott + Scott will need to prove that Yuga Labs and its celebrity promoters failed to disclose their paid ads, because they are legally obligated to do so.
Since the law firm also claims a pump and dump occurred, it would need to prove that Yuga Labs was involved in such practices, which can be difficult given the strength of the Yuga Labs ventures.
Pumps and tailings, or rug pulls, usually indicate that the project dumped artificially inflated assets on the community before the project was completely abandoned.
Related: ApeCoin price looks to rise 45% after another metaverse demo
The nature of Apecoin and BAYC NFTs may also be challenging, as the law firm may have to say they are being promoted as investment contracts under the unregistered securities category.
Cointelegraph has reached out to Yuga Labs for comment on the proposed lawsuit, but has yet to receive a response from the company.