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Not so bored anymore? What does the “Bored Ape Yacht Club” case tell us about the NFT industry?

Following a period of explosion and excitement, the previously flourishing non-fungible tokens (NFT)1 market seems now to be behind us. If just about one year and a half ago, these unique digital art assets were sold at astonishing prices2, it is with no surprise that the current NFTs scenario is very different. Always surrounded by intense speculations, not only have the NFT’s values fallen significantly but NFTs are also linked to multiple fraud accusations.

In this context, stands out the “Bored Ape Yacht Club” (BAYC) case. Considered as a major milestone in the NFT market and once sold for millions of dollars, the BAYC NFT collection owned by Yuga Labs Inc., a blockchain startup company, is now at the center of a class-action lawsuit filed by its investors in California. Claiming that they “were inappropriately induced to buy financial products created by Yuga Labs”3 and endorsed by celebrities and big companies, the plaintiffs now seek restitution for their losses.

The unresolved question concerns whether Yuga Labs Inc. and the other defendants violated federal securities law, as the investors allege, or whether they shall accept the inherent risks associated with the digital assets they acquired.

The rise of the apes

About a decade ago, when the concept of NFT first gained prominence, few could have predicted the proportions its market would reach4. It was actually in 2017 with the creation of the Ethereum ERC-721 token standard5 that the NFT industry began to take shape and at the end of January 2022 reached its all-time peak6.

The BAYC illustrates perfectly the NFT industry increase. Launched in April 2021 at the cost of 0,08 Ethereum (ETH) (approximately $200) each, one year later the BAYC NFT average price was 153 ETH (approximately $420,000) and reached the mark of 852.439 ETH ($3.4. million) with the most expensive ape ever sold in October 20217. In June 2023, they still represented 40% of the NFT market cap8.

In fact, the BAYC has become one of the most notable and valuable NFT collections in the crypto world, standing as a central symbol of the NFT industry itself. But what lies behind the huge success of these digital assets?

Certainly, the BAYC’s success is due both to its unique features – the exclusive access to an online group and to real-world private events9, as well as to the possibility of exploiting the NFT’s intellectual property rights – and to the celebrities’ engagement in its promotion.

In October 2021, Guy Oseary, a Hollywood talent agent took on the role of BAYC manager. Simultaneously, Yuga Labs established an agreement with MoonPay USA LLC, a company that renders crypto payment services, to facilitate the purchase of its NFTs. Many celebrities became early investors of MoonPay and also acquired the BAYC NFTs, exposing the apes intensely to the world (mostly by social media posts, but also in television shows or video clips). Thus, the BAYC’s “uniqueness and exclusivity” drew in “regular investors”.


“Where there are big winners there are likely to be big losers”10

The NFT was presented to the world as a tremendous cutting-edge blockchain investment, capable of offering significant returns to its investors. The enthusiasm and strong speculations surrounding its rapid ascent, coupled with endorsements from celebrities, led many investors to believe that its value would perpetually rise. However, like other economic bubbles11, the NFT market eventually deflated. In 2022, the NFTs’ values and volume of sales dropped sharply12.

The other reasons associated with the NFT market crash are wash trading practices13, the decline of the cryptocurrencies’ prices, its influence by larger macroeconomic factors, and the NFTs’ connection with scams.

In this context, the once-hyped BAYC collection fell just as fast and hard as it climbed. Its average floor price, surpassing $420,000 by the end of April 2022 plummeted to slightly above $80,000 by May 2023 (which corresponds to a decrease of 340% in just over a year). As of lately, even though its prices seem to have stabilized, the same cannot be said of ApeCoin, the Ethereum-based token created by Yuga Labs in connection with the BAYC14.


Real et al. v. Yuga Labs Inc. et al.15

In December 2022, amidst the decline of the NFTs market and the BAYC, Adam Titcher and Adonis Real filed a lawsuit on behalf of BAYC and ApeCoins alleging Yuga Lab’s use of celebrity endorsements to promote the NFTs infringed federal securities laws. The lawsuit, filed before the U Central District Court of California and represented by Scott + Scott Attorneys at Law LLP, also targets Guy Oseary, MoonPay, as well as a vast list of celebrities, including Paris Hilton, Justin Bieber, and Madonna, and major companies as Adidas and Universal Television. Recently, the auction house Sotheby, which generated over $24 million on BAYC NFT’s sales, was also named in the case16.

According to the lawsuit, the investors’ $1.4. million loss would be directly attributed to a scheme orchestrated by Yuga Labs, Guy Oseary, and MoonPay to entice investors into buying "losing investments at drastically inflated prices”. This scheme would be based on “entirely manufactured” endorsements from celebrities “discreetly” paid via MoonPay”17. Hence, BAYC’s impression as an exclusive club was created, increasing the interest and the value of its NFT, as investors would be willing to vest larger amounts of money to be part of the club.

In a statement, Yuga Labs described the lawsuit as “opportunistic and parasitic”. In the same line, Sotheby considered the allegations as “baseless”.


What does the future hold for NFTs?

Given the above, the BAYC’s case illustrates almost caricaturally, the excesses and the frenzy surrounding the NFT market since its beginning, as well as its recent downturn. While it appears plausible to say that the celebrity endorsements contributed to this NFT fever, only the Court will be able to determine whether their involvement constitutes a breach of US federal securities law. However, this scenario leaves us no doubt that investing in the NFT industry is a very risky business.

Nevertheless, and despite all of the uncertainty surrounding the NFT market resurgence, there are optimistic expectations about it. According to the Grandview Research of May 2023, the NFT market is expected to grow 34.2% from 2023 to 2030, reaching the mark of $211.72 billion18.    

In this scenario, the NFT frenzy echoes the Tulip Mania, as in both cases the excessive speculation and market excitement are followed by the market’s collapse. However, in the past, the prices of the bulbs eventually stabilized. This historical perspective allows us to believe that the resolution of the BAYC’s case – whatever it might be – may announce a new NFT era. In this new era, the values of these digital assets will align more reasonably with the benefits offered to their owners in real life, such as access to VIP events and exclusive commercial offers.

That is why the BAYC’s case outcome is eagerly awaited.

Do not hesitate to contact our IP/IT team in case of any doubt.


1 Non-fungible tokens (NFTs) are cryptographic assets with unique identification codes and metadata that distinguish them from each other and cannot be replicated. Each NFT has its own value and cannot be replicated.

2 The most expensive NFTs ever sold were “The Merge” by $91.8 million in December 2021 and “The First 5000 Days” sold to a sole collector by $69.3 million in March 2021.

3 See Yuga Labs on scott-scott.com

4 In 2012, the mathematician Meni Rosenfeld introduced the concept of “colored coins” to represent unique real-word assets using a digital ledger. In 2014, the digital artist Kevin McCoy and the entrepreneur Anil Dash created “Quantum”, the first NFT in history sold in 2021 for $1.5 million at a Sotheby’s auction (See Code is Not Law: Case on Who Owns the First NFT Dismissed by Judge, Mar. 23, 2023).

5 NFTs are commonly built on the Ethereum blockchain network, but there are many kinds of non-fungible tokens.

6 See NFTs, Once Hyped as the Next Big Thing, Now Face ‘Worst Moment’, Sep. , 2023.

7 See, TAHELYANI, Renuka. Top 11 Most Expensive Bored Ape Yacht Club NFTs, Mar. 22, 2023.

8 See, The NFT Market Crash: The Complete Guide, June 02, 2023.

9 In this sense, the BAYC is described as “A limited NFT collection where the token itself doubles as your membership to a swamp club for apes” according to its website.

10 BERMAN, Bruce. The Emperors’ New Codes: Understanding IP Community Ambivalence Toward Digital Assets., May 1, 2022.

11 The NFTs are not a typical economic bubble, in fact, they incorporate a certain fascination and esteem, as they are displayed by their owners as a symbol of wealth.

12 “According to data from Chainalysis, the average price of NFT token sales fell by a staggering 92% from May 2022 to February 2023, from $3,894 to $293” (See The NFT Market Crash: The Complete Guide). And according to DappRadar, between January 2022 and July 2023, “monthly trading volume for NFTs plummeted 81% between January 2022 and July 2023” and “monthly NFT sales figures have dropped 61% (See NFTs, Once Hyped as the Next Big Thing, Now Face “Worst Moment).

13 Wash trading is an act in which an individual or a company buys an asset to subsequently resell it to themselves, artificially inflating its market price. Despite being illegal in numerous asset classes in various territories, including the US and the European Union, it remains a grey area in the NFT (and most generally, in the cryptocurrency sector). (CONG, Lin William; LI Xi; TANG Ke; YANG Yang, Wash trading in centralised crypto exchanges: The need for transparency and accountability, Apr. 17, 2023).

14 ApeCoin reached its peak shortly after its launch in March 2022, being trading at $26,70. Currently, it is trading at $1,16, reflecting a decline of more than 42% over the past 30 days (BEGANSKI, André. ApeCoin Plunges to New Low, Down 42% Over Last Month, Sep. 11, 2023).

15 Real et al. v. Yuga Labs Inc. et al., Case No. 2:22-CV-08909, U.S. District Court for the Central District of California.

16 REGUERRA, Ezra. Sotheby’s and Yuga Labs respond to lawsuit from Bored Ape investors, Aug. 17, 2023.

17 RUSCOE, Emilie. Scott + Scott to Rep Investors in Bored Ape NFT Promo Suit, July 12, 2023.

18 See Non-fungible Token Market To Reach $211.72 Billion By 2030, May 2023.

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