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OpenSea Hit With Class-Action Lawsuit for Unregistered Securities.
Reinout te Brake | 23 Sep 2024 08:00 UTC
OpenSea Users File Class-Action Lawsuit Over Alleged Sale of Unregistered Securities
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.
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.