Shaq Is The Latest Celebrity To Be Sued For Selling NFTs – ARTnews.com
Former professional basketball player Shaquille O’Neal is being sued for alleged securities violations related to his NFT collection titled ASTRALs or, The Astral Project, according to a complaint filed in the Southern District of Florida last week.
In the class action, Virginia resident Daniel Harper, who invested in Astral’s NFTs and later suffered losses after the crypto market crashed, has accused O’Neal of violating Section 15 of the Securities Act of 1933, which requires brokers to be registered with Securities and Exchange Commission, and to offer and sell unregistered securities.
Astrals was founded by O’Neal and his son Myles in 2022. 3D artist Damien Guimoneau, known for his creature designs, was brought on board to create the look of the project, which features 10,000 NFTs of humanoid animals and creatures that swings with weapons and other accessories. The NFTs were sold on Solana, a popular blockchain similar in function to Ethereum.
O’Neal promoted the project to his millions of fans on social media, offering giveaways, access to private Discord channels and promised returns on investment, the complaint alleges. IN one video posted on social mediaO’Neal told his followers, “We won’t stop until 30 SOL floors,” in other words, O’Neal believed that smallest valuable NFT in the Astrals collection would be worth 30 SOL, which at the time was worth about $2,400.
Harper, the plaintiff, purchased 96 Astrals over the course of a year. According to a chart Harper provided, the most he spent on one of these NFTs was 13.5 SOL.
As crypto markets have tumbled over the past year and NFT collectors have found themselves with little to show for their investments, class action lawsuits have been filed around the country, alleging that companies like Yuga Labs and Dapper Labs sent unregistered securities to a public who did not have the knowledge to accurately appraise the new assets being sold to them.
In each of these cases, the courts have applied the Howey test—a common legal test established in 1946 by the United States Supreme Court in SEC v. WJ Howey Co. – to determine whether the relevant NFT projects are securities or not. Under the Howey test, something is a security if the following four conditions are met: It is an investment of money; There is an expectation of profit from the investment; The investment of money is in a joint venture and; Any profit comes from the efforts of a promoter or third party.
In Friel v. Dapper Labs, a judge ruled last February that Dapper Labs’ product, NBA Top Shot NFTs, are securities. The case will now go to trial unless Dapper Labs decides to settle. Although no court has decided that everyone NFTs should be considered securities, the Dapper Labs ruling gives us some insight into how judges interpret new assets and the new ways they have been promoted. For example, while Dapper Labs never used the word “profit” in their marketing of their NFTs, the trial judge found that Dapper Labs found other ways to signal a promise of profit.
“Although the literal word ‘profit’ is not included in any of the tweets, the ‘rocket ship’ emoji, ‘stock chart’ emoji and ‘money bags’ emoji objectively mean one thing: a financial return on investment. The judge’s decision.
If the case is not dismissed, the assigned judge will likely apply the Howey test to Astrals.
O’Neal is far from the only celebrity to run into legal trouble over NFTs. Madonna, Justin Bieber and Jimmy Fallon were recently named in a class action lawsuit alleging they promoted the sale of Bored Ape Yacht Club NFTs without disclosing that they were compensated.