NFT Holders Sue Art Gallery Over Alleged Metaverse Deception

A group of 36 non-fungible token (NFT) holders has filed a lawsuit against Eden Gallery and artist Gal Yosef, claiming that the promised benefits of their NFT project, the Meta Eagle Club, were never delivered. The lawsuit, filed on October 9 in a New York federal court, alleges that the project was a "rug pull" scam, with the gallery and artist failing to create the promised metaverse-based private club and other perks.

Key Takeaways

• Lawsuit Filed: 36 NFT holders are suing Eden Gallery and Gal Yosef.

• Allegations: Claims of fraud and unmet promises regarding the Meta Eagle Club.

• Financial Impact: The project raised $13 million but allegedly delivered little in return.

The Meta Eagle Club, which sold 12,000 unique humanlike eagle NFTs, reportedly generated $13 million from February 2022 to November 2023. However, the plaintiffs argue that no substantial efforts were made to build the club, despite claims from the project team.

The lawsuit highlights that the individuals behind the project lacked the necessary experience in blockchain and smart contract development, raising questions about their ability to deliver on the promises made to investors.

Promised Benefits

NFT holders were enticed with a variety of perks, including:

• Entry into exclusive Eden Gallery events

• Hot air balloon rides

• Private jet and helicopter experiences

• Exclusive collectible artworks

Despite these promises, the plaintiffs claim that only a few tickets to the advertised experiences were provided, along with two Galyverse events and 11 physical artworks signed by Gal Yosef.

Shift in Project Focus

On January 12, 2023, a vote on Eden Gallery's Discord led to a decision to reallocate the remaining budget for promised items into "alternative utilities," which included maintaining an active marketplace. This shift was attributed to a downturn in the market, further frustrating NFT holders who felt misled.

The plaintiffs assert that the gallery and Yosef had pledged to create more art for an online world called the Galyverse, which was supposed to enhance the value of their investments. However, they argue that these promises were never fulfilled, leading to significant financial losses.

Legal Claims

The lawsuit accuses Eden Gallery and Gal Yosef of:

• Common law fraud

• Unjust enrichment

• Violating New York General Business Law

The group is seeking damages to be determined by the court, along with injunctive relief and attorney’s fees.

Broader Context

This lawsuit is not an isolated incident in the NFT space. Other recent legal actions include:

• A class action against OpenSea for selling unregistered securities.

• A lawsuit against Dolce & Gabbana for delays in NFT product delivery.

The NFT market continues to face challenges, with reports indicating that a significant percentage of NFT collections are struggling to maintain value. As of August 2024, analysts noted that 96% of approximately 5,000 NFT collections examined were deemed inactive.

The ongoing legal battles reflect a growing concern among investors regarding the viability and transparency of NFT projects, as the market grapples with its future amidst fluctuating interest and investment.

Sources

• NFT holders sue art gallery, alleging it broke metaverse promise, Cointelegraph.

• Holders de NFT demandaron a una galería de arte que habría incumplido su promesa de metaverso, Cointelegraph.

• Holders de NFT demandaron a una galería de arte que habría incumplido su promesa de metaverso, Cointelegraph.