Nike's foray into the NFT realm sparks a class action lawsuit
In a surprising turn of events, American footwear giant Nike is facing a $5 million lawsuit over its venture into the world of Non-Fungible Tokens (NFTs). The lawsuit, filed by a group of investors, accuses Nike of misleading them and selling unregistered securities in the form of NFTs.
The lawsuit alleges that Nike deceived investors by misrepresenting the nature of the NFTs, promising enduring value but failing to uphold that promise by ceasing its NFT activities. The shutdown of Nike's NFT division, RTFKT, in December 2024, and Nike's subsequent withdrawal from the NFT market, resulted in a significant price plummet.
The 'Nike Cryptokicks' NFT collection, launched in April 2022, consisted of 20,000 unique items. The rare items in this collection exceeded $100,000 in value during the NFT boom, when people were spending millions to secure CryptoPunks as avatars for social media. However, the value of the Nike Cryptokicks NFTs erased after Nike ceased its NFT activities, leaving investors with worthless assets.
Nike profited handsomely from both the initial sales and trading fees of the NFTs. The company also offered rewards and exclusive access to limited-edition physical shoes to owners of its NFTs.
The allegation is that Nike misled investors into believing the NFTs were not unregistered securities, leading to a false valuation. The lawsuit accuses Nike of offering securities that failed the Howey test, as the NFTs were publicly offered and investors bought them with the hope of profit.
Jagdeep Cheema, a lawyer representing all investors in the lawsuit against Nike, stated that the lawsuit is based on the argument that the NFTs were securities due to meeting the requirements of the Howey test. This test, named after a 1946 U.S. Supreme Court case, determines whether an asset is a security by evaluating whether it is an investment of money in a common enterprise with a reasonable expectation of profits derived from the efforts of others.
It is important to note that the specific individual names of the plaintiffs are not publicly detailed. The lawsuit seeks $5 million in damages from Nike.
Nike's venture into NFTs came in 2021, when the company acquired the startup RTFKT and launched NFTs depicting shoes or hoodies for the metaverse. The lawsuit accuses Nike of engaging in a 'rug pull,' causing a significant financial loss to the investors.
This development marks a significant blow to Nike's reputation, which prides itself on integrity and quality. Nike has yet to issue a public statement regarding the lawsuit. The case is currently ongoing, and the outcome remains to be seen.
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