I was skeptical about cryptocurrency and was utterly baffled by the appeal of NFTs. The former seemed risky and the latter felt very much like a speculative bubble driven by hype in which the underlying entity being bought and sold had no intrinsic value. So I was not surprised by the collapse of various cryptocurrency endeavors like FTX and even less surprised by the recent lawsuit filed against Sotheby’s auction house, accusing them of fraud in inflating the value of the ugly Bored Ape BFT and using celebrities to hype it.
A group of investors is suing Sotheby’s Holdings Inc. and others over a 2021 auction and promotion of Bored Ape Yacht Club non-fungible tokens (NFTs) following a collapse in prices for the celebrity-endorsed collectibles.
The four named plaintiffs in the class action lawsuit allege that the auction house “misleadingly promoted” the NFTs and colluded with creator Yuga Labs to artificially inflate their prices.
Sotheby’s is among 30 defendants named in the lawsuit, with celebrities like Justin Bieber and Paris Hilton also accused of promoting the NFT collection without disclosing their financial links to it.
According to cryptocurrency market tracker CoinGecko, the colorful digital illustrations of apes can now be bought for as little as $52,445. As recently as May 2022, the cheapest would have cost collectors over $400,000.
In September 2021, Sotheby’s sold over 100 of the NFTs to a single buyer in an online auction for more than $24 million, beating the pre-sale estimate of $12 million to $18 million.
…The Bored Ape Yacht Club, a collection of 10,000 NFTs hosted on the Ethereum blockchain, launched in April 2021. The images feature cartoon apes with computer-generated features and accessories, such as gold fur, laser eyes, “hip hop clothes,” a “sushi chef” headband or a sailor hat.
The lawsuit against their creator also names several other companies involved in promoting the NFTs, such as sportswear giant Adidas, claiming they conspired in a “vast scheme” to artificially inflate prices.
Crypto payments company MoonPay is meanwhile also accused of market manipulation. The lawsuit says that Yuga Labs used MoonPay to “discreetly pay their celebrity cohorts” and make interest in the NFTs “appear to be organic” rather than the result of a paid promotion.
What shocked me was the sentence that a Bored Ape NFT “can now be bought for as little as $52,445”. I would have expected it to be close to zero.
There seems to be a steady drop in the price of NFTs in which “the average price of NFT token sales fell by a staggering 92% from May 2022 to February 2023, from $3,894 to $293.”
I tend to be very wary of crazes that promise to make money quickly. Partly it is because I am risk averse and partly because my needs are simple and I have no need or desire to accumulate a lot of money, which seems to be a major motivator for people who buy into the hype of things like cryptocurrencies and NFTs.
The whole business screamed pyramid scheme from the get-go. As Dylan wrote: “there’s a brand new gimmick every day / just to try and take somebody’s money away.”
I think one should never try to collect anything intended to be collectable. I used to collect postage stamps, but when the USPS realized that stamps bought by collectors were free money for them they started issuing so many new designs each year that it became nearly impossible to keep up and the pleasure of a new acquisition faded. Beanie Babies are an obvious example. POP figures (small plastic dolls with ludicrously oversized heads and minimalist features) were a craze about six or seven years ago but once again so many designs were made that the market was over-saturated.
Plenty of people bought into the NFT hype not out of a desire for wealth, but for a desire to get out of financial straits. Most of whom are now worse off than ever.
… the recent lawsuit filed against Sotheby’s auction house, accusing them of fraud in inflating the value …
Don’t auctioneers have a professional obligation to bring in the highest payments possible? No doubt they also have codes banning outright lies, forgeries, and the like, but this litigation apparently charges straight into the gray zones and contradictions of their business.
It may well set a major precedent -- and with a case built on intangibles, probably one that lowers the standards.
I never quite got NFTs as well.
AFAICT, they are more or less worth zero.
I’ve copied and pasted, screen shotted, downloaded, or printed out a few NFTs here and there.
Ones that I didn’t own and someone else did.
So, I still don’t “own them” whatever that means.
But I have possession of them so I can email them or hang them on the wall or whatever.
What I actually did was put them in a file somewhere and forgot about them.
It’s not like there is any lack of art or photos in this world and I already have a clutter problem.
So what real right or value does an NFT give anyway?
Is the FBI or the NFT Security going to break down my door and arrest me someday?
I’ll make sure to video that and turn them into NFTs.
I’m sure a lot of right wingnuts would pay a lot to see me get arrested by Homeland Security.
I thought the Romans had that one covered.
Caveat Emptor meaning Let the buyer beware.
AFAICT, in cryptocurrencies, that principle is still holding true.
There is a line between Caveat Emptor and outright fraud, but often no one is sure where it is.
No, you haven’t, because NFTs are not images. NFTs are just cryptotokens to the ERC-721 standard -- basically blocks of binary data, generally containing a URL as part of their data payload. Whilst that URL usually points to an image (at least at the time of minting), the image is not in any sense actually part of the token, nor is there any guarantee that the URL will continue to reference the same resource as it did at the time the token was generated, or indeed anything at all. The URL is just there to make the token “non-fungible” -- i.e. not identical to every other similar token (because they contain different URLs). It could just as easily be a string of random bits -- it’s just that trying to sell people “collectable” strings of random bits is even more obviously bullshit.
None whatsoever.
There never actually was a big NFT market -- the vast majority of the claimed market turned out to be self-dealing, which is generally regarded as fraudulent in every other market.
What puzzles me is what remedy these people think the courts could give them. I’m not a lawyer but I’m pretty sure saying something is collectable is about the same as a burger joint saying they have the best burgers in the world. It doesn’t matter if it’s McDonalds or a local mom & pop burger joint doing it. You can’t sue them if you find a burger you think tastes better. In the same vein I doubt you can sue Sotheby’s or the Franklin Mint or Trump for selling you something without much intrinsic worth on the basis of it being collectable. Maybe if they guarantee they’ll buy it back at a certain price later and then didn’t, but I’d be truly shocked if anyone had made such a guarantee.
The point is that they didn’t just say they were collectable -- they engaged in extensive and arguably fraudulent market manipulation to create the appearance of a robust, liquid, and valuable market, where in fact there was none.
In art terms, it’s like picking an unknown artist with a sizeable but worthless back catalogue, then engaging in a number of auctions and PR campaigns where famous people you have secretly employed “buy” these works for eyewatering sums with money (largely imaginary “money” in this case) you have given them for the purpose, while talking up how they’re the Next Big Thing any everybody who’s anybody wants to buy them, before finally selling them to actual punters on the basis of the valuations established by those earlier fake sales.
We’ve reached a point in capitalism where we’re just coming up with nonsense like this where we can pretend a digital file that does nothing except point at a URL has intrinsic value that we can invest and speculate on. At least a stamp collector can still send out letters in the mail (while the USPS still exists).
At least cryptocurrency is supposed to be (allegedly) something you could use in lieu of actual money to purchase goods and services. Because there has been so much investment and speculation and it’s value is so volatile it’s useless as a currency. Who wants to buy a loaf of bread with something that could buy you a car in a month? Who wants to charge so many Bitcoins a month to sell a car when in a month it will only be enough to buy a loaf of bread?
I’m not sure that there’s anything particularly new about that in principle, just the specific form… Just think of NFTs and other such crypto-assets as unregulated penny stocks. The thing that’s been most striking to me about the whole crypto kerfuffle has been their determination to recapitulate the entire history of modern finance, but at warp speed, and without learning anything at all from history.
Meanwhile, over in the real world of “grown up” finance, people are plowing billions of dollars into companies formed for the single purpose of acquiring other companies, before they’ve identified those other companies they intend to acquire. Quite literally “an undertaking of great advantage, but nobody to know what it is” (which is a reference to an apocryphal tale from the South Sea bubble of 1720).
I’m surprised that nobody has mentioned tulips. 😎
I keep all my assets as cash (not currency, money in the bank), principally because I don’t understand financial markets and I’m suspicious of those who do.
I liked one description of NFTs that I heard.
You know about DRM, digital rights management?
You know how people tend to prefer buying DRM-less content since the point was buying the content?
Well, NFTs are basically content-less DRM. All you’re actually buying is the verifiable security check.
Obligatory “Line goes up” Dan Olson video which is the definitive takedown of NFTs (And some takedown of crypto) https://www.youtube.com/watch?v=YQ_xWvX1n9g
Cryptocurrencies are not much less of a scam , just less obvious a scam than NFTs (see https://web3isgoinggreat.com/ and https://davidgerard.co.uk/blockchain/)
It seems there is an endless supply of scammers and marks. The marks want to make money and the scammers succeed. For awhile, at least.
I avoided financial markets for decades because they’re obviously a scam for rich people to get richer at everyone else’s expense. The problem being the rich have devalued the real world and almost anything of worth within it which the average person can get ahold of to the point where storing your money in the market where they can skim off the top becomes one of the only reasonable options for things like retirement (there are others like government I bonds but you have to go digging for them and the Republicans keep edging towards flushing it all down the toilet to grandstand for their ignorant base).
My first encounter with someone in the investment part of the financial sector was an over-dressed gentleman conspiciously displaying signs of wealth and trying to sell me and my poor friend on a mutual fund. I was taught how stocks worked in school so I had a very basic idea of what he was talking about, but asking for any details about how the fund was operated got only the most vague answers. We didn’t buy a thing from him. Seriously, in what other field can you know nothing about your product and still be a successful salesman?
Art.
This business about intrinsic value basically falls flat when considered in that
light. How something intrinsically worthless is yet subject to being inflated in value.
What’s the intrinsic difference in value between, say, a famous painting and a reproduction that can only be distinguished from the original by an expert?
What’s the intrinsic value of a vanity number plate for a vehicle?
(Or, going up a level, what’s the intrinsic value of the copyright to a musical band’s corpus?)
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lanir, bill, if you’ve ever had a bank account or had a credit card or borrowed or suchlike, you’ve failed to avoid the financial markets. Hard to do that.
Is that a trick question, or are you just fortunate enough to never have had to deal with sales in a technical field from the back-end?
To expand on John Morales comment, there is no intrinsic value to anything. Value itself is a social construct.
I wouldn’t say it’s only a human social construct, in that I suspect that we can identify other animals assigning value to an object, like a dog with a favorite toy. But if we separate our understanding of value from necessities for survival, it becomes clear that value is assigned not by needs but by desires. The vast majority of our desires are reflections of the structure/influence of our society, what remains may be necessities required for survival but these are often undervalued until they are critically needed. Like people who forget to store food and water in preparation for a hurricane. Necessities are often undervalued against their need, while luxuries are overvalued. This strongly suggests that the concept of value doesn’t rely on any intrinsic properties of any object, the value of an object is only that which we assign to it.
We talk about the marginal value of a dollar in economics classes, but there is also a marginal value to a potato.
This discussion reminds me of an old quote:
We know the price of everything and the value of nothing.