(CNN) Sitting across from Jimmy Fallon on “The Tonight Show,” Paris Hilton, wearing a sparkling neon green turtleneck dress and a high ponytail, looked at a picture of a glum cartoon ape and said it “reminds me of me.” The audience laughed. It did not look like her at all.
Hilton and Fallon were chatting about their NFTs — non-fungible tokens, typically digital art bought with cryptocurrency — from the Bored Ape Yacht Club. The camera zoomed in on framed printouts of the ape cartoons. “We’re both apes,” Fallon said. Hilton, with her signature vocal fry, replied, “Love it.”
“The Tonight Show” episode from January 2022 is a YouTube time capsule showing the temporary alliance between celebrity marketing and the crypto industry. Bored Ape Yacht Club was not the biggest crypto phenomenon, but it was one of the top beneficiaries of celebrity hype. That celebrity hype, in turn, helped draw new consumers to crypto — an industry rife with manipulation and fraud, and one that US regulators are now giving more scrutiny in the wake of the collapse of crypto exchange FTX. But for a time, when crypto’s prices seemed to have no limit, the money appeared too good for some to ask questions — questions like: Why are some of those apes wearing prison clothes?
“That was a very significant moment, because the audience for that show is very different from the typical crypto person,” explained Molly White, a software engineer and a fellow at the Harvard Library Innovation Lab. The Bored Apes — a computer-generated collection of 10,000 cartoons — were being presented as a status symbol, membership in an exclusive club. Hilton, Fallon, and other celebrities had joined — and viewers could join, too, if they bought an NFT.
A class action lawsuit, filed in December, alleges Hilton, Fallon, and other celebrities conspired in a “vast scheme” to artificially inflate the price of Bored Ape NFTs and enrich themselves, the crypto payments company they used to get the apes, MoonPay, and the company that made the Bored Apes, Yuga Labs.
Hilton and Fallon did not respond to requests for comment.
Rise of the apes
In April 2021, Yuga Labs released the Bored Ape Yacht Club collection of cartoon apes with a computer-generated combination of features and accessories, such as gold fur, a sailor hat, laser eyes, 3-D glasses, a cigarette, as well as “hip hop” clothes, a “pimp coat,” a prison jumpsuit, a pith helmet, and a “sushi chef” headband. The founders were anonymous, known only by their online screen names.
That fall, Hollywood agent Guy Oseary reached out to Yuga Labs, eventually investing in the company and joining its board. Soon celebrities started posting their Bored Apes on social media — including Oseary’s client Madonna, along with Steph Curry, Lil Baby, DJ Khaled, Snoop Dogg, Gwyneth Paltrow, and more. Bored Apes started selling for hundreds of thousands of dollars. Justin Bieber bought an ape for $1.3 million. By March 2022, Yuga got a $450 million venture capital investment, and was valued at $4 billion.
The class action lawsuit claims, “this purported interest in” Bored Apes “by high-profile taste makers was entirely manufactured by Oseary at the behest of” Yuga Labs. “In order to make the promotion of, and subsequent interest in, the BAYC NFTs appear to be organic (as opposed to being solely the result of a paid promotion), the Company needed a way to discreetly pay their celebrity cohorts.” The suit alleges they did this through MoonPay.
When Jimmy Fallon introduced his audience to crypto, he also presented a frictionless way to buy in: MoonPay, a payments company that allows customers to buy crypto through most major payment systems like with a credit card. In November 2021, Fallon said on “The Tonight Show” that he’d bought his first NFT through MoonPay. “MoonPay? MoonPay! I did my homework — Moonpay, which is like PayPal but for crypto,” Fallon said. The following January, when Hilton showed her ape on the show, she said, “You said you got it on MoonPay, so I went and I copied you.”
A few months later, in April 2022, MoonPay announced more than 60 celebrities and influencers had invested in the firm. MoonPay spokesman Justin Hamilton told CNN that Hilton, Fallon, and the other celebrities were part of the company’s $550 million Series A financing round that closed in November 2021, which was before the Fallon-Hilton conversation when neither mentioned they were MoonPay investors. The FTC generally requires an endorser to disclose when they have a financial interest in promoting a company.
The celebrity hype and unbelievable prices generated enormous media interest. “Rolling Stone” minted NFTs of the magazine with Bored Apes on the cover. Guy Oseary was on the cover of “Variety” under the headline “NFT King.”
Inside the world of MoonPay
Independent journalists, under the names of Coffeezilla and Dirty Bubble Media, noticed blockchain ledger records suggesting not everything was as it appeared. Cryptocurrency is traded on the blockchain, a permanent and public ledger of every transaction. That means it can reveal financial relationships, if you figure out the right questions to ask.
Hours before Justin Bieber bought an ape for the equivalent of $1.3 million on January 29, 2022, Bieber received Ethereum worth about $2.5 million in his crypto wallet, the blockchain shows. A couple weeks before Post Malone released a music video in November 2021 in which he bought a Bored Ape through MoonPay, MoonPay transferred cryptocurrency then worth about $760,000 into the artist’s wallet, and sent two more payments, worth about $640,000, a couple weeks after. MoonPay admits it paid for the placement in Post Malone’s video but says other celebrities paid full price for their service in US dollars.
Many celebrities who got apes thanked MoonPay on social media. Gwyneth Paltrow tweeted, “Joined @BoredApeYC ready for the reveal? Thanks @moonpay concierge.” The rapper Gunna posted on Instagram, “I Bought A @boredapeyachtclub NFT worth 300K No Cap ! His Name is BUTTA Thanks @moonpay !” Lil Baby mentioned MoonPay in his song “Top Priority.”
The blockchain shows MoonPay paying high prices for the apes, and then transferring them to purported celebrity wallets for free. MoonPay explains this as a service that helps wealthy people buy NFTs without setting up their own crypto wallet.
The company says the “white-glove” service was created because MoonPay’s CEO, Ivan Soto-Wright, had a lot of celebrity friends, and many of them asked how they could get an NFT. Jimmy Fallon, Lil Baby — they were Soto-Wright’s friends, Hamilton said.
CNN spoke to several former MoonPay employees who said they were skeptical the celebrities paid for their NFTs, because there was no evidence on the blockchain.
The company’s ape purchases have been significant. Since 2021, one of its wallets, “MoonPayHQ,” has spent at least $25 million on NFTs — 60% or about $15 million of that was spent on Bored Apes. The company told CNN they had 14 apes in a cold storage wallet, which offers more safety. It said that five of those NFTs were “purchased by concierge clients that are in the process of being transferred.” The last ape was purchased in April 2022, 10 months ago, according to blockchain records.
One influencer has said he was approached about an ape. In a Twitter Spaces audio chat last year, celebrity jeweler Ben Baller said, “Real talk: not once, not twice, three times, I’ve been offered a Bored Ape through MoonPay. … The fact that some of these super top-tier all-star NBA players have them? And I was like, ‘Yo this is all cap [lies.]’ They didn’t buy this sh*t.” Baller did not respond to CNN’s request for comment. MoonPay’s spokesman said this didn’t happen.
Oseary, the Hollywood agent and MoonPay/Yuga investor, texted CNN in response to a question: “NO ONE is paid to join the club and Yuga do NOT and have NOT given away any apes.” He said he paid full price for his Bored Ape, and so did Madonna.
Yuga Labs declined an on-the-record interview with CNN. In a statement, the company said, “In our view, these claims are opportunistic and parasitic. We strongly believe that they are without merit, and look forward to proving as much.” Hamilton, MoonPay’s spokesman, said of the lawsuit, “We look forward to it being dismissed.”
Anonymity and accusations
“The fine art market is a scam — that’s OK, at least there’s art going on,” said Max Gail, who’s been a blockchain developer since 2010, and founded Omakasea and Eth Gobblers.com. (Gail hosted the Twitter Space in which Baller discussed Bored Apes.) The NFT market, he said, “is like a parody of the fine art market. They took the same strategies that had been employed in the fine art market, but then distorted it with some strange crypto economics.”
Anonymous buyers and sellers dealing in items whose values are difficult to calculate has made the fine art market susceptible to money laundering, a Senate investigation found in 2020. In 2022, an average of more than half of NFT trading volume on the Ethereum blockchain was “wash” trading, according to an analysis at Dune Analytics. (Most NFTs are on Ethereum.) Essentially, wash trades are a transaction in which the buyer and seller are the same person, or they’re working together. Wash trading has been illegal in traditional finance since the Great Depression, because it can distort the market by making people believe there is a high volume of interest in the investment. The ability to open many anonymous cryptocurrency wallets makes wash trading NFTs easier. A Chainalysis report found one “prolific NFT wash trader” made 830 sales to self-financed wallets in 2021.
Though NFTs have been celebrated as the future of digital art, and a way for artists to earn royalties, many NFT collections operate more like securities — a financial instrument, like stocks or bonds, that hold some monetary value. “People will say that the technology itself has provided this whole new way of creating digital art,” Harvard’s Molly White said. “It’s not that unique. The unique part of it is the speculative bubble.”
The NFT marketplace does not always make sense even to those who benefit from it. “Bored Apes have gone from $100 to $100,000 in a year. Nothing appreciates that fast,” a successful NFT artist said. The artist’s own works had gone from a couple hundred dollars to tens of thousands. One of the artist’s major collectors “treats me as a commodity and my art is a commodity and he’s always pumping and dumping it. … It’s being treated as a financial vehicle.”
But there is pressure not to raise questions about the system. The NFT artist did not want to go on the record, saying it would be career suicide. “The big collectors watch for artists that FUD. And as soon as an artist FUDs, they get cancelled,” the artist said. FUD is “fear, uncertainty, and doubt,” or criticism of crypto.
Beyond how the Bored Ape NFTs are traded, what they depict is at issue in yet another Yuga Labs legal battle.
In the fall of 2021, accusations began swirling on social media that the Bored Ape Yacht Club contained visual references to racist memes from the troll site, 4chan. The artist Ryder Ripps — who’s worked with stars like Kanye West and Tame Impala — started tweeting about the claims of racist imagery. Ripps claims Guy Oseary, the Hollywood agent on Yuga’s board, called to pressure him to stop talking about the claims. (Oseary told CNN, “I can’t speak on active litigation.”)
Ripps doubled down and made a website cataloging the claims. Then, in an act he says was meant to protest the alleged racism and comment on the idea you can’t copy an NFT, Ripps made copycat NFTs he sold as RR/BAYC. Yuga sued Ripps for trademark infringement, and argues that his maligning of the Yuga apes is nothing more than a profiteering tactic. Ripps says Yuga is trying to silence its critics, and has doubled down on his claims as part of his defense in the trademark suit.
Yuga Labs called the accusations “the incoherent ramblings of a small group of for-profit conspiracy theorists.” However, the Yuga lawsuit against Ripps could affect the class action lawsuit against Yuga. Ripps’s lawyers have issued subpoenas to Paris Hilton and Jimmy Fallon.
To assert its trademark rights, Yuga must show that consumers associate its logos with its products, and it did so in a legal filing, in part, by pointing to celebrity owners “including TV host Jimmy Fallon…”
Ripps’s lawyer, Louis Tompros, asserts Yuga compensated celebrities for promoting its NFTs, and they did not disclose it. “And by doing that, in our view, they have gotten this public notoriety for their brand improperly,” Tompros told CNN. “And so having gotten it improperly, they now can’t go and assert that they have these rights.”
This week Yuga co-founder Wylie Aronow published a 24-page letter explaining that he was stepping back from the company and addressing widespread rumors that the company and its products were connected to the alt-right.
“I will soon call out this utter bullsh*t under oath,” he wrote.
So what are the racist references alleged by Ripps and others? To start, there’s what’s right on the surface: some of the NFTs are pictures of apes in “hip hop” clothes, a “pimp coat,” a prison uniform, a bone necklace, gold and diamond grills. Record executive Dame Dash, a crypto enthusiast, pointed out on a podcast last year that monkeys and apes are old racist tropes.
“Think if you were a racist, like ‘Guess what I’m gonna do? I’mma get Black people to love monkeys so much that they gonna buy them, wear them on their neck… go to something called ApeFest and they’re gonna like it!’ Wouldn’t that sound funny?” Dash said on the podcast. “That’s what’s happening.”
Dash told CNN he hadn’t intended to target Yuga directly. But he’d started to wonder if he was being trolled, given the ubiquity of apes in crypto. “Racism is different these days — you can’t be so overt about it. You have to kind of troll,” Dash said.
This week Yuga agreed to settle a lawsuit with a developer who worked with Ripps, with the developer agreeing to pay them $25,000 and saying he would reject all disparaging statements against Yuga Labs.
Ryan Hickman, a software engineer who also worked with Ripps on RR/BAYC, is also being sued separately by Yuga. Hickman, who is Black, thought the Bored Apes looked like stereotypical portrayals of Black people as stupid or lazy. He said he thought this would be obvious to most people the second they saw an image of a Bored Ape. But, he said, “then somebody says, ‘Well, it’s worth $100,000.’ They say, ‘Okay well, tell me more.'”
In a statement, Yuga said, “Our company and founders strongly condemn the spread of hate, in any form, against any group.” Hollywood agent Oseary said he’d never been on the troll site 4chan.
The crypto community has adopted a lot of terms — rekt, frens, wagmi — that were popularized on 4chan, and it’s not always clear if the person using them understands where they came from. “I doubt that they were a massive alt-right troll campaign,” Harvard’s Molly White said. “I do think it’s likely that the creators of the project basically included some nods to 4chan.”
“It’s not one thing that makes it racist. It’s everything together as a package,” programmer and 8chan founder Fredrick Brennan said, looking at comparisons between Pepe the Frog memes and Bored Apes. Brennan took an interest in the claims that Yuga referenced 4chan memes, because he’d seen them so often when he was running 8chan, a similar troll site. He quit 8chan in 2016, and in 2019 pushed for it to be taken down because it had become a hub for extremist violence. He began to suspect the Yuga founders were like the people he used to know.
Take one of the apes’ characteristics, which Yuga calls a “sushi chef headband.” Brennan reads and speaks Japanese, and saw the headband actually said “kamikaze,” which has been used as a slur against Japanese people. A similar headband appeared on a Pepe meme. “That one was the most shocking,” he told CNN.
In a legal filing connected to the Ripps case, Yuga said the apes reflected a combination of many traits, “not any person’s purported racism.”
“I was hoping, in my eternal optimism,” Brennan said, “that people would become a lot more skeptical of tech bros. … And that liberal — so-called — celebrities in Hollywood would view these people with suspicion. Apparently not.”