Two users of the prominent non-fungible token (NFT) marketplace OpenSea have filed a class-action lawsuit in a U.S. federal court, accusing the platform of selling unregistered securities contracts.
The plaintiffs, Anthony Shnayderman and Itai Bronshtein, initiated the suit on September 19 in Florida, according to a report by Law.com.
The plaintiffs argue that certain NFTs purchased through OpenSea, including those from the once sought-after Bored Ape Yacht Club collection, have become worthless due to their purportedly illegal nature.
Plaintiffs Mention OpenSea’s Well Notice
Central to their case is OpenSea’s recent disclosure of receiving a Wells notice from the U.S. Securities and Exchange Commission (SEC).
A Wells notice is a formal notification indicating that the SEC has concluded an investigation and may bring an enforcement action against the recipient.
News of @Opensea receiving a Wells Notice shows plain and simple that the current SEC’s crusade against the crypto industry continues unabated. This is in contrast to what Vice President Harris said two weeks ago announcing her economic agenda: pic.twitter.com/cafsHJ6DhU
— Brian Quintenz (@BrianQuintenz) August 28, 2024
Shnayderman and Bronshtein contend that this notice implies OpenSea may be held accountable for facilitating the exchange of unregistered securities, which they believe includes certain NFTs sold on the platform.
The lawsuit draws parallels to previous SEC actions against NFT projects such as Stoner Cats 2 and Impact Theory, both of which were charged with selling unregistered securities.
The plaintiffs argue that the NFTs they purchased meet the criteria of an investment contract as defined by the Howey test, a legal standard used to determine whether a transaction qualifies as a security.
They claim that their investments in these NFTs were part of a common enterprise with the expectation of profit derived from the efforts of others.
Shnayderman and Bronshtein allege that OpenSea’s platform listings were misleading, causing them to purchase NFTs they describe as “worthless and unlawful unregistered securities.”
They also accuse OpenSea of breaching a user warranty by failing to adequately moderate its marketplace for such securities.
The plaintiffs further assert that OpenSea unjustly enriched itself by collecting fees and accepting payments from transactions it allegedly knew, or should have known, were linked to unregistered securities sales.
CryptoPunks NFT Sold at 80% Discount
In August, a CryptoPunk NFT sold for $23.2 million in 2022, resold at an 80% discount for 1,500 ETH, worth around $3.9 million.
The original owner, Deepak Thapliyal, who purchased the NFT for 8,000 ETH, bid farewell to the token on X (formerly Twitter).
The new buyer, VOMBATUS, later confirmed the purchase, equating the low price to getting a “free” token.
Meanwhile, there has been a trend of companies discontinuing their involvement in the NFT space.
Back in March, Starbucks, the renowned multinational coffee chain, made the decision to terminate its NFT rewards program.
In January, gaming retailer GameStop announced the closure of its NFT marketplace after scaling back its crypto services over the past two years.
More recently, X, under the ownership of Elon Musk, discontinued a feature that allowed premium users to use NFT images as their profile pictures.
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