Lawsuit Filed Against Nike Over NFT Property Dispute
In a shocking turn of events, American footwear giant Nike is facing a lawsuit over its NFT project, accused of a "rug pull" and the unauthorized issuance of a security. The lawsuit, led by investor Jagdeep Cheema, represents all those who bought the "Nike Cryptokicks" NFTs, which were introduced in April 2022.
The lawsuit alleges that Nike misled investors about the status of the NFTs as unregistered securities. The NFTs, according to the lawsuit, met the requirements of the Howey Test for a security. This test is used to determine whether a transaction involves an investment contract, and thus, a security.
Nike's NFT project involved rewarding token owners for completing small tasks and granting them exclusive access to limited physical shoes. The value basis of the NFTs, which investors bought into, was the backing by the Nike brand. However, the NFTs could not maintain their value after Nike discontinued its NFT activities following the sudden closure of RTFKT in December 2024.
The closure of RTFKT and Nike's withdrawal from NFTs led to a crash in NFT prices, which some in the crypto scene called a "rug pull." This term is typically used to describe when someone publishes a token to collect money and then abandons the project, leaving investors at a loss.
The lawsuit alleges that Nike made tens of millions of dollars from the sale and trading fees of the "Nike Cryptokicks" NFTs. It demands $5 million in damages as compensation for the deception. Jagdeep Cheema is represented by the legal advocacy group Public Justice in this lawsuit against Nike.
It's important to note that Nike acquired the startup RTFKT in 2021 for venturing into NFTs. The company issued NFTs depicting virtual shoes and hoodies for the metaverse. Nike made a significant profit from the sale and trading fees of these NFTs, but the value of these tokens has been significantly impacted since the project's closure.
This lawsuit is a reminder for companies entering the NFT space to be transparent about the nature of their digital assets and the risks involved. As the NFT market continues to grow, it's crucial for investors to make informed decisions and for companies to uphold their responsibilities.
