Two OpenSea users have proposed a class-action lawsuit in the United States against the non-fungible token (NFT) marketplace OpenSea, alleging that it sells unregistered securities contracts.
In a federal court in Florida on September 19, Anthony Shnayderman and Itai Bronshtein asserted that the NFTs they acquired on OpenSea, including those from the Bored Ape Yacht Club collection, are worthless “due to their illegal nature.”
The pair cited OpenSea’s disclosure of a Wells notice from the Securities and Exchange Commission last month in their arguments, asserting that it “suggests that OpenSea is in the hot seat and may be found liable for facilitating the exchange of unregistered securities.”
A Wells notice is a notification that the Securities and Exchange Commission (SEC) has initiated an investigation and may pursue enforcement action against the notice recipient.
The lawsuit also references the successful SEC action against NFT initiatives Stoner Cats 2 and Impact Theory, in which the regulator found that the NFTs were unregistered securities sales.
According to Shnayderman and Bronshtein, the NFTs they acquired on OpenSea were investment contracts under US securities laws, as the securities-defining Howey test demonstrated. They contended that the NFTs were an investment in a joint enterprise and that they reasonably anticipated profits from the efforts of others.
The suit alleged that OpenSea’s NFT listings were “deceptive” and misled the Plaintiffs into purchasing worthless and illicit unregistered securities. OpenSea claims that it “moderates the NFTs on its exchange, including real-world financial instruments…securities.'”
Shnayderman and Bronshtein alleged that OpenSea violated a user warranty by failing to moderate the OpenSea exchange for unregistered securities.
They also claimed that it unjustly enriched itself by charging fees and accepting funds “derived from the sale of unregistered securities,” which it knew or should have known.
Shnayderman and Bronshtein’s attorney, Adam Moskowitz, managing partner of The Moskowitz Law Firm, told Cointelegraph in an email that “in today’s ever-changing regulatory environment, there should be a process to sell NFTs in a well-regulated environment.”
Moskowitz stated, “We are eager to collaborate with OpenSea to establish the most effective pathway and future process for the crypto industry and consumers.”
