As NFTs and crypto gained a popular following and became increasingly mainstream, celebrities appeared to line up to sign lucrative endorsement deals for the digital assets, with many investing in them themselves.
For many of the A-listers who rode the NFT wave, however, that decision may not have aged well.
On Thursday, a class action lawsuit was filed accusing a string of celebrities including Jimmy Fallon, Gwyneth Paltrow, Madonna and Justin Bieber of peddling Bored Ape Yacht Club NFTs without making it clear that they had investments in Yuga Labs, the company behind the digital assets.
An NFT, or non-fungible token, is a one-of-a-kind digital asset that belongs to its owner and them only. Last year, as the hype around them surged, NFTs were selling for millions of dollars.
Some of those assets have plummeted in value. While the price of Bored Ape NFTs hit a record high of more than $434,000 in April, they are now worth around $85,000, according to data from CoinGecko.
By July, NFT sales had plummeted more than 90% to hit 12-month lows.
The new lawsuit, which was filed in the U.S. District Court for the Central District of California according to The Hollywood Reporter, accused the celebrities involved of committing fraud by persuading amateur traders that the NFTs would increase in value.
The companys entire business model relies on using insidious marketing and promotional activities from A-list celebrities that are highly compensated (without disclosing such), to increase demand of the Yuga securities by convincing potential retail investors that the price of these digital assets would appreciate, the complaint said, according to court documents seen by the media outlets.
Noam Galai/Getty Images
Other celebrities named in the legal action include Kevin Hart, Snoop Dogg, and Serena Williams and her husband, Reddit co-founder Alexis Ohanian. The celebrities named in the lawsuit did not respond to Fortunes requests for comment prior to publication.
The lawsuit alleged that a Nov. 2021 segment on NBCs The Tonight Show saw host Jimmy Fallon reveal he had bought his first Bored Ape NFT through MoonPaywithout any disclosure that he held a stake in the firm.
Plaintiffs accused the show of including a paid advertisement for the BAYC collection of NFTs and MoonPay that was masquerading as a purportedly organic segment.
NBCUniversal did not respond to Fortunes request for comment.
Claimants also accused pop superstar Bieber of falsely claiming he purchased an NFT for $1.3 million. In reality, it was given to him in exchange for his promotion of Yuga Labs products.
According to reports, most of the celebrities endorsing Yuga Labs products were said to be recruited by talent manager Guy Oseary, who paid them through crypto firm MoonPay, in which he was an investor.
Oseary, the MoonPay Defendants, and the Promotor Defendants each shared the strong motive to use their influence to artificially create demand for the Yuga securities, which in turn would increase use of MoonPays crypto payment service to handle this new demand, court documents said, according to The Hollywood Reporter.
At the same time, Oseary could also use MoonPay to obscure how he paid off his celebrity cohorts for their direct or off-label promotions of the Yuga Financial Products.
Representatives for Yuga Labs were not immediately available when contacted by Fortune, but a spokesperson for the company told The Hollywood Reporter last week the claims being made were opportunistic and parasitic.
We strongly believe that they are without merit, and look forward to proving as much, they said.
Yuga Labs was founded last year, and quickly established itself as a key player in the NFT space, with its Bored Ape Yacht Club among its most popular collections.
The lawsuit filed on Thursday isnt the first involving celebrities and digital assets, and previous cases have had mixed outcomes.
Earlier this year, reality TV star Kim Kardashian was fined $1 million by the SEC for touting a cryptocurrency without properly disclosing she was being paid to do so.
However, a federal judge dismissed a class action case against celebrity crypto endorsers earlier this month, saying there was an expectation for investors to act reasonably before basing their bets on the zeitgeist of the moment.
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