Jimmy Fallon, Gwyneth Paltrow and Justin Bieber have been sued in a proposed class action lawsuit accusing them and a number of other celebrities who promoted Bored Ape Yacht Club non-fungible symbols of fraud.
The suit alleges that the celebrities misled their followers into buying BAYC NFTs, among other unregistered securities issued by Yuga Labs, in order to inflate their value, prompting buyers to purchase “losing investments at drastically inflated prices.”
“The truth is that the company̵[ads1]7;s entire business model relies on using insidious marketing and promotional activities by highly compensated A-list celebrities (without disclosing such) to increase demand for the Yuga securities by convincing potential retail investors that the price on these digital assets will appreciate,” the complaint, filed Thursday in California federal court, says.
The suit also names Madonna, Kevin Hart, Stephen Curry, Snoop Dogg, Serena Williams, Post Malone, The Weeknd, Fallon’s production company Electric Hot Dog, Inc. and Universal Television, among others. It is claimed that most of them were recruited by talent manager Guy Oseary, who led a scheme with Yuga Labs to discreetly pay them for their endorsements through crypto firm Moonpay. Oseary’s venture capital firm Sound Ventures was an early investor in Moonpay, according to the complaint.
Oseary is reportedly linked to several of the celebrity promoters, including Bieber, Paltrow and Hart, through their early investments in Moonpay. By increasing demand for BAYC NFTs and Yuga Labs’ Apecoin crypto-tokens, the suit claims they also increased demand for Moonpay.
“Oseary, the MoonPay Defendants and the Promoter Defendants all shared the strong motive to use their influence to artificially create demand for the Yuga Securities, which in turn would increase the use of MoonPay’s crypto payment service to handle this new demand,” it said the complaint. . “At the same time, Oseary was also able to use MoonPay to hide how he paid his celebrity groups for their direct or off-label promotions by Yuga Financial Products.”
In an episode of The Tonight Show On November 11, 2021, Fallon Moonpay and BAYC promoted the NFT collection by announcing that he received his first NFT through the crypto firm, which bills itself as a white-glove service designed to help celebrities buy digital assets. He did not disclose that he had a financial stake in Moonpay.
“Or didn’t Electric Hot Dog or Universal reveal that this purportedly organic segment on the Tonight Show was actually a paid advertisement for the BAYC collection of NFTs and MoonPay by two celebrities (Fallon and Winkelmann) who are business partners with an investor (Oseary) in both Yuga and MoonPay,” writes lawyer John Jasnoch in the complaint.
The suit, which names Oseary and Yuga Labs, says the campaign convinced investors to buy BAYC NFTs.
Each of the defendant promoters received digital assets from Moonpay or Yuga Labs for their endorsements, according to the lawsuit. Bieber, for example, received roughly $1.3 million worth of BAYC NFTs when it was issued for an allegedly fraudulent post on Instagram that said he bought it with his own money. Paltrow similarly announced to investors on January 26 that she was “joining” the BAYC community and thanked Moonpay for their services in facilitating the purchase. She also did not disclose that she has a financial stake in the firm.
Trading volume for BAYC NFTs has fallen 93 percent from its launch high. Similarly, the value of ApeCoin tokens has fallen 90 percent from its all-time high.
“In our view, these claims are opportunistic and parasitic,” a Yuga Labs spokesperson said in a statement. “We strongly believe they are without merit, and look forward to proving it.”
Fallon, Bieber, Paltrow, Universal and Moonpay did not respond to requests for comment.
Celebrity promoters of crypto, including Kim Kardashian, Larry David and Tom Brady, have been named in similar cases alleging fraud over their endorsements. On Wednesday, a federal judge dismissed a lawsuit against backers of crypto EthereumMax, accusing them of misleading their followers into buying EMAX tokens only to sell their stakes when their value was inflated. While saying the case raises “legitimate concerns” about celebrities’ ability to persuade uncritical followers to buy “snake oil with unprecedented ease and reach,” U.S. District Judge Michael Fitzgerald found that there is an expectation that “investors should act reasonably before they base their rates on the zeitgeist of the times.”