Yuga Labs faces plenty of problems as lawsuits, probes, and hacks mount
Yuga Labs, the company behind the Bored Ape Yacht Club (BAYC) NFT collection, is struggling with an investigation by the Securities and Exchange Commission (SEC), a hack of its Mailchimp account, and a flurry of lawsuits flying back and forth.
On Wednesday, Yuga Labs warned that a massive data breach compromised its Mailchimp account containing customer data. An unauthorized party gained access.
Downplaying the leak’s severity, Yuga claimed that Mailchimp didn’t have proof that the attacker exported any data. Neither did anyone use the information to mint any NFTs, said Yuga. It warned users to avoid any unsolicited emails, surprise NFT mints, or DMs requesting sensitive information.
Scott & Scott Attorneys at Law LLP filed a lawsuit against dozens of celebrities who endorsed BAYC and its associated ICO, Apecoin. The lawsuit alleged “misleading” promotion of Yuga Labs NFTs. Scott & Scott said the promotions led to investment losses since April 2021.
The law firm named entertainers like Justin Beiber, Paris Hilton, Madonna, and the late-night talk show host Jimmy Fallon as defendants. Plaintiffs include Adam Titcher and Adonis Real, who say they bought Yuga Labs-produced assets in April 2021.
Attorneys filed the lawsuit with the US District Court for the Central District of California in December 2022.
Meanwhile, Yuga Labs sues an artist
Yuga Labs is pursuing a trademark infringement lawsuit against Ryder Ripps, an artist who created a BAYC knock-off. Ripps claims Bored Apes contains racist and pro-Nazi imagery. He justified his knock-off NFT collection as satirical commentary.
However, he likely didn’t help matters by raising $1.8 million from sales of the knock-off NFTs – which could open the door to Yuga Labs arguing that Ripps unfairly profited from its corporate trademarks.
The project was marketed under his own name, calling it the “Ryder Ripps Bored Ape Yacht Club.” The similar name might confuse some investors into buying his NFTs as a Yuga Labs-endorsed creator collection.
The presiding judge recently ruled that Yuga co-founders Wylie Aronow and Greg Solano must face deposition in the case. Ripps said he looks forward to questioning them under oath.
Read more: Bored Apes puts the ‘shit’ in shitcoin
The SEC probes Yuga Labs for potential violations
The SEC reportedly opened an investigation into whether Yuga Labs violated securities regulations. It’s unknown whether the probe will lead to an enforcement action. Bloomberg says the Commission’s probe is part of a broader investigation into NFT creators.
The SEC’s attorneys sent subpoenas to NFT creators requesting information about the offerings. It especially sought information on fractional NFTs — a proposed use of digital tokens that could represent ownership of an asset.
The SEC says the Howey Test could apply to some NFTs. It frequently uses the Howey Test to determine whether assets like digital tokens qualify as securities and would fall under its jurisdiction.
Even the famously crypto-friendly SEC commissioner, Hester Pierce, allowed that some components of the digital asset world might fall under the SEC’s jurisdiction. “People need to be thinking about potential places where NFTs might run into the securities regulatory regime,” she told CoinDesk TV’s First Mover.
Yuga Labs seems confident that it is not facing anything severe enough to stall its progress. It has sold millions of dollars worth of its recent Sewer Pass.
For more informed news, follow us on Twitter and Google News or listen to our investigative podcast Innovated: Blockchain City.