Dapper Labs has agreed to pay $4 million to settle a class action lawsuit. Back in 2021, a group of investors sued the NFT company and its executive Roham Gharegozlo for violating securities laws. Now, it is up to The District Court Judge of the Southern District of New York to approve the agreement.
Around three years ago, investors allegedly claimed that Dapper Labs’ NBA Top Shot Moment NFTs were unregistered securities. They also accused Dapper Labs of withholding investors from liquidating their assets for “months on end.” This, they said, was done to keep value locked on the platform. Doing so did not allow the NFTs to be bought or sold on external NFT platforms when the suit was filed.
What does the settlement mean?
Getting into a settlement would prohibit the plaintiffs from associating the securities tag with the NFTs.
Alongside distributing funds to class members, the settlement funds would be used to cater to settlement administrator costs and attorneys’ fees.
Last year, a federal judge deemed Flow - the blockchain developed by Dappar Labs that hosted the Top Shot NFTs - to be a private blockchain. However, the defendants have time and again asserted that Flow is decentralized and ain’t under Dapper’s control.
Now, as a part of the settlement, the class action suit’s plaintiffs have further demanded “certain business changes” to be implemented by the company. Dapper Labs has concurred. According to one of the demands, the company has to transfer the FLOW token possession from the ecosystem development reserve to the Flow Foundation.
Roham Gharegozlou, Dapper Labs’ CEO clarified that Dapper Labs “can, does, and will continue to be a major holder of FLOW.” He asserted that the future of the ecosystem's products is “fully open and composable,” allowing owners to do "anything" they want with their assets and letting developers create experiences without traditional limits. He added,
“After discovery, it was understood and agreed that Flow blockchain is a decentralized public network and that digital collectibles like NBA Top Shot are not securities in the same way trading cards are not securities.”
Other demands made by the plaintiff include implementing employee training programs revolving around compliance and ethical practices. Other insistences like bolstering the payment and withdrawal speeds, and permitting third-party marketplaces besides Dapper Labs to foster Top Shot NFT transactions have already been adhered to.
