NFT Holders Sue Art Gallery And Artist Over Alleged 'Rug Pull' Scam

According to Cointelegraph, a group of 36 non-fungible token (NFT) holders has filed a lawsuit against Eden Gallery and artist Gal Yosef, accusing them of failing to deliver on promises related to a metaverse-based private club and other perks. The complaint, filed on Oct. 9 in a New York federal court, alleges that the Meta Eagle Club project was a 'rug pull' scam. The Meta Eagle Club NFT collection, which sold 12,000 unique humanlike eagles and raised $13 million between February 2022 and November 2023, is at the center of the controversy. The plaintiffs claim that despite updates from the project team, nothing substantial was done to build the Meta Eagle Club. They also allege that the team lacked experience in blockchain, smart contract development, and software engineering. NFT holders were promised entry into the Meta Eagle Club and various perks, including raffles for Eden Gallery events, hot air balloon rides, private jets, helicopters, and exclusive collectible artworks. However, the group claims that only a few tickets to these experiences were provided, along with two Galyverse events and 11 physical artworks signed by Gal Yosef. On Jan. 12, 2023, a vote on Eden Gallery’s Discord led to reallocating the remaining budget from the roadmap into 'alternative utilities,' including maintaining a marketplace. This shift was attributed to the market downturn. The plaintiffs allege that the gallery and Yosef promised to create more art for an online world called the Galyverse, which would increase members' investments and provide dividend-like digital assets. However, they claim these promises were not fulfilled, causing the NFTs to lose value. The lawsuit accuses Eden Gallery and Yosef of common law fraud, unjust enrichment, and violating New York General Business Law. The plaintiffs seek damages, injunctive relief, and attorney’s fees. Eden Gallery and Yosef have not responded to requests for comment. This lawsuit is not an isolated incident. On Sept. 19, two OpenSea users filed a class action against the NFT marketplace, alleging it sold unregistered securities contracts. In May, a customer sued Italian fashion brand Dolce & Gabbana and digital assets platform UNXD over delays in delivering NFT products. The broader NFT market continues to struggle, with an Aug. 20 report by NFT Evening analysts indicating that 96% of about 5,000 NFT collections examined were considered dead in 2024.