Dapper Labs, creator of the once wildly popular NBA Top Shot Moments NFT collection, announced Monday that it has settled a class-action lawsuit alleging that the company violated securities laws by improperly selling digital collectibles.
According to court documents provided by Dapper Labs, the company agreed to settle the lawsuit for $4 million. The money will be allocated to a settlement fund that can be used by eligible claimants, the document also said.
“The settlement in Friel v. Dapper Labs further affirms Dapper Labs’ conviction that NBA Top Shot Moments is not a security under federal law,” Dapper Labs said in a statement.
Dapper Labs’ success in resolving the case is significant considering that the judge overseeing the case last year found that NBA Top Shot Moments NFTs met the requirements to be considered a security, allowing the Friel v. Dapper Labs lawsuit to proceed. It represents a bit of a twist.
Plaintiffs in the lawsuit alleged that Dapper Labs made hundreds of millions of dollars in profits by selling unregistered securities while artificially “supporting the market” for NFTs. They also accused Dapper Labs of “preventing users from withdrawing money for months on end.” According to a report in The Verge.
The case was originally filed in 2021 in the U.S. District Court for the Southern District of New York.
Proving the legitimacy of the CEO
Dapper Labs co-founder and CEO Roham Gharegozlou, who was named as a co-defendant in the lawsuit along with the company, appeared to be vindicated by the settlement. “We are pleased with the outcome of today’s agreement, which marks an important step forward for Dapper Labs and the Flow community,” he said in a statement.
NBA Top Shot NFTs are issued on the Flow blockchain created by Dapper Labs.
In a statement, Dapper Labs pointed out that there are four “additional” marketplaces that are “approved to display and sell NBA Top Shot Moments” starting in March 2022. “This expansion gives collectors more flexibility and the opportunity to trade and enjoy moments with the full support of the NBA and NBA Players Association,” Dapper Labs said.
Monthly trading volume for NBA Top Shot NFTs peaked at $226 million in February 2021, according to CryptoSlam data. Like most other top NFT collections, NBA Top Shots has seen a significant drop in trading volume.
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