DraftKings’ $10M NFT Fiasco: A Comedy of Errors and Legal Shenanigans! 😂

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In a most curious twist of fate, DraftKings, that illustrious purveyor of chance and whimsy, has consented to part with a staggering $10 million to settle a securities class-action lawsuit. This legal escapade was initiated by the beleaguered buyers of its non-fungible tokens (NFTs), those digital curiosities once peddled through a now-defunct marketplace, which, like a magician’s rabbit, has vanished into thin air.

On the fateful day of February 28, in the hallowed halls of a Boston federal court, Judge Denise Casper, with a flourish befitting a maestro, granted a preliminary settlement motion. This motion, filed just days prior on February 26 by the intrepid lead plaintiff, Justin Dufoe, promised to resolve all claims “for $10 million in cash.” Ah, the sweet scent of legal resolution wafting through the air!

The settlement, a veritable pot of gold at the end of a tumultuous rainbow, will see the $10 million divided among the members of the class action. Dufoe, ever the opportunist, has hinted at a future request for a $50,000 award “for his time and effort litigating the case,” alongside attorneys’ fees that could gobble up to one-third of the settlement fund, plus litigation expenses. Because who doesn’t love a good payday?

This nearly finalized settlement brings us closer to the conclusion of a saga that began in March 2023, when it was alleged that the NFTs sold by DraftKings were, in fact, investment contracts under US law, thus masquerading as unregistered securities. Oh, the irony!

The lawsuit, a veritable who’s who of corporate intrigue, also named DraftKings co-founders Jason Robins and Matt Kalish, along with the finance chief turned chief transformation officer, Jason Park. A cast of characters worthy of a Shakespearean drama!

Dufoe, in his plaintive cry, lamented a loss of $14,000, a sum he claims to have lost by selling DraftKings NFTs at a loss on the company’s DK Marketplace, and by holding onto NFTs that had plummeted in value. A tragic tale indeed!

In a bold move, DraftKings sought to dismiss the suit in September 2023, arguing that the NFTs were not investment contracts as defined by the Howey test. However, Judge Casper, with a discerning eye, rebuffed this claim in July, suggesting that the NFTs could indeed be securities. A twist worthy of a legal thriller!

Later that very month, DraftKings shuttered its NFT marketplace, citing “recent legal developments.” The class settlement motion claimed that this closure rendered the NFTs “worthless,” and that DraftKings had offered certain NFT investors a mere fraction of their original investments. A classic case of “you win some, you lose some!”

The recent filings revealed that DraftKings and the class group embarked on settlement discussions post-marketplace closure, culminating in an “all-day mediation” filled with rigorous negotiations before a neutral third party. One can only imagine the coffee consumption during those discussions!

The class group hailed the resulting agreement as an “outstanding result,” a veritable triumph that would “avoid continued and costly litigation that would deplete resources.” Because who wants to spend their time and money in court when you can settle for a cool $10 million?

They further noted that “realistic and supportable damages” could range from $18 million to $58 million, with the settlement amounting to a mere 26% of the midpoint of potentially recoverable damages. An excellent recovery, indeed, under the circumstances!

Remarkably, this marks the second NFT-related lawsuit that DraftKings has settled this year. In January, the company reached a settlement with the National Football League Players Association, accused of failing to pay for the use of NFL player likenesses in NFTs. A veritable cornucopia of legal entanglements!

The precise details of that settlement remain shrouded in mystery, but the suit was stayed until March 28 to finalize the agreement. Ah, the suspense!

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2025-03-03 08:50