Nike has come under fire after a group of investors filed a class-action lawsuit, accusing the sportswear giant of causing significant financial losses due to the closure of RTFKT, its Web3-focused subsidiary acquired in 2021.
Investors allege that Nike's actions led to a sharp decline in the value of NFTs under the Nike brand, destroying millions of dollars in investments.
Nike is accused of promoting unregistered securities through non-fungible tokens (NFTs)
According to court documents, Nike allegedly 'scammed' the community by shutting down RTFKT and ending demand for related digital assets.
The plaintiffs claim that Nike used its brand power and marketing expertise to promote what they describe as unregistered securities before abruptly abandoning the project. The lawsuit claims that Nike capitalized on the crypto boom to drive NFT sales. Investors bought NFTs hoping their value would increase due to Nike's promotional efforts.
However, after the dissolution of RTFKT, these incentives disappeared. Buyers who previously expected exclusive rewards and profitable resales saw their investments lose value almost instantly.
‘Since the value of Nike NFTs depended on the success of a particular promoter and project – here, Nike and its marketing efforts – investors bought this digital asset hoping that its value would increase in the future as the project gained popularity based on the Nike brand,’ the lawsuit states.
The complaint emphasizes that promises of task fulfillment, unlocking limited-edition products, and secondary sale opportunities were key motivations for purchasing NFTs.
With the disappearance of RTFKT's activity, these incentives evaporated, leaving investors with worthless digital assets.
Adding to their arguments, the plaintiffs insist that Nike NFTs qualify as securities under federal law. They claim that Nike did not register the digital assets with the U.S. Securities and Exchange Commission (SEC) or disclose associated risks.
Investors claimed they would not have purchased digital assets at inflated prices if they had known about the real risks.
‘The plaintiff and others would never have purchased Nike NFTs at the prices they paid, or at all, if they had known that Nike NFTs were unregistered securities or that Nike would cause a scam exit,’ the investors claimed.
The plaintiffs are seeking a jury trial and damages exceeding $5 million for alleged violations of consumer protection laws in New York, California, Florida, and Oregon.
RTFKT Experiences Technical Failures
Meanwhile, this lawsuit has emerged against the backdrop of growing investor dissatisfaction on April 24, when technical issues prevented the display of NFT images related to Nike.
The head of RTFKT's technology department, Samuel Cardillo, explained that the failure occurred due to the contract with Cloudflare ending earlier than expected.
‘In early April, it was (finally) decided to stay on the free plan with Cloudflare, and I started working on transferring the infrastructure. Somehow that morning, Cloudflare decided to switch to the free plan a few days before the contract ended, which also caused this error when Cloudflare refuses to stream images and videos,’ Cardillo explained.
Although most images have already been restored, Cardillo is now transferring RTFKT NFT files to the decentralized storage platform Arweave using AR Drive. This move aims to protect NFT owners from similar failures in the future.
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