The SEC’s Wells notice highlights that OpenSea faces a class-action lawsuit in Florida for selling unregistered securities
Anthony Shnayderman and Itai Bronshtein have filed a class-action lawsuit against OpenSea, an NFT marketplace. The lawsuit was filed in a federal court in Florida on the 19th of September and alleges that OpenSea is selling unregistered securities with emphasis on Bored Ape Yacht Club.
This lawsuit comes amid the latest developments of OpenSea receiving a Wells notice from the US Securities and Exchange Commission (SEC), which means that the SEC might bring an enforcement action against OpenSea soon.
OpenSea Faces Legal Issues
A Wells Notice is a legal notice that the SEC has finished with an investigation process and may be preparing to take enforcement action. This notice is particularly relevant to the plaintiffs’ case since they claim that it suggests specific risks for OpenSea in connection with the sale of unregistered securities.
This argument is consistent with other actions that have been taken by the SEC against other NFT projects including Stoner Cats 2 and Impact Theory which were charged over the same aspects. The plaintiffs argue that the NFTs they purchased from OpenSea meet the requirements of an investment contract as defined by the Howey test that is used to establish whether a trade is in security.
Shnayderman and Bronshtein claim that OpenSea’s listings deceived them into buying what they deemed as “worthless and unlawful unregistered securities.” They said these purchases were made for profit in reliance on others, which is the legal requirement of the Howey test on a common enterprise.
NFT Market Risks Amid Corporate Retreats
The legal action occurs during waning engagement and massive losses in the NFT market. For instance, one CryptoPunk NFT bought at a record high of 8,000 ETH, equivalent to $23.2 million in 2022, was sold at a 60% loss for 1,500 ETH. This case illustrates that investing in NFTs is risky and can rapidly change one’s attitude toward evaluating its worth.
Also, the overall trend recently evidenced many companies pulling back from the sphere of NFTs. For instance, Starbucks halted the NFT rewards program, and GameStop shut down the NFT marketplace after cutting back on the crypto connections. These actions have arisen amid frequent discussions surrounding the selling potential and legal status of NFTs.
