The SEC in a dilemma – Yuga Labs is one of the greatest successes in the field of non-fungible tokens, the famous NFT. The collections of Bored Ape and CryptoPunks drive the e counters crazy also arouse greed. But, following the fall of the cryptocurrency market and therefore the price of these NFTs, some owners consider themselves offended and would like to fight with the parent company. A law firm has addressed the issue and is considering a collective process. But the US Stock Exchange Cop (SEC) hesitates to position himself. He challenges and perspectives.
Investors potentially scammed by Yuga Labs
Scott + Scott is an international law firm with offices in the United States and Europe. Its teams are specialized consumer protection, shareholder rights or in securities disputes. On July 12 they posted on their blog a call for testimonials to possibly consider a class action against Yuga Labs.
The company hits the American startup hard and the words chosen are explicit. Here is an excerpt:
“Yuga Labs inappropriately encouraged the community to purchase Bored Ape Yacht Club and the project-affiliated APE token. (…) Promoters and celebrities were used to inflate the price to unsuspecting investors. Eventually, retail investors were left with tokens that had dropped more than 87% from the inflated price on April 28, 2022. “
In fact, it’s not just about NFT but also tokens APE. On the one hand, therefore, there would be a company that promotes images and tokens, which raises the price and sells everything on the shoulders of a poor community of buyers gullible. The famous Pump and drain, a classic cryptocurrency move. But the situation is far from that simple.
First of all, it isn’t Yuga Labs who decided to issue tokens. Rather, it is the DAO, i.e. the autonomous organization of NFT owners. It is therefore difficult to accuse him. Also, as far as this Pump and Dump allegation is concerned, no one left the project with the cash. The token price has only followed the global decline in markets. It will therefore be difficult to demonstrate something in that direction. But the biggest problem in this case will be convincing the DRY who must intervene.
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But the reality is much more complicated for the SEC
Indeed, what is an NFT? If it is a digital work of art, the SEC has no authority over it. Brian FireProfessor of Law at the University of Kentucky, explains why:
“I see very little chance that the SEC would want to go into this and… characterize it [les NFT] as security. (…) I think they will resist tooth and nail. (…) Because that would open a Pandora’s box for them and force them to regulate all kinds of other things they don’t want to regulate. “
The SEC actually has no desire to do so regular art market and does not plan to start with NFTs! If you buy a painting hoping to make a capital gain, will you file a claim if the painter’s price drops? On the NFT side, there is really no chance of seeing any of them procedure be successful. And on the side of the APE tokens, we’re also going round and round. Brian Fyre continues:
“The oddity is how you do insider trading unless you do it with something that is a stock traded on the stock exchange?”
In short, to be able to do it sue Yuga Labsthe SEC should first position on the very nature of tokens APE and possibly NFT. And he decides to put them in the safety category, which he has refused for years. The SEC is more likely “press the button “ and use terms like “Electronic fraud and money laundering “ to characterize the facts. But, someday, it will be necessary to build a regulatory framework for its unidentified financial objects, because the fashion does not seem ready to pass.
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