Pepe the Frog NFT Lawsuit

An amusing piece of viral news in the non-fungible space this week centres around a rare nude Pepe the Frog NFT, its creator Matt Furie, and a half a million dollar lawsuit from its buyer Halston Thayer.

Artist Matt Furie, inventor of the popular internet meme of an anthropomorphic green frog with a human body, stated in the NFT auction that the signed image of a bathing naked Pepe would be a limited edition, one-of-a-kind artwork for the buyer. The whole idea of what an NFT is.

He did also state another 99 NFTs matching the image above would be minted, but those would be kept in the possession of his DAO (decentralized autonomous organization) known as PegzDAO, and never be auctioned for sale.

After crypto enthusiast and NFT investor Halston Thayer bought what he thought would be the one unique bathing Pepe NFT in circulation using Ethereum – worth an equivalent of $537,084 (150 ETH) – Furie allegedly released another 46 of them for free.

That increase in the supply, as anyone familar with cryptocurrency can guess, devalued Thayer’s Pepe NFT, now valued at under $30,000.

Thayer has now filed a lawsuit in California (where Furie is a resident) to sue PegzDAO, Furie and his web-based company Chain/Saw LLC for the remaining $500,000 he invested, plus punitive damages.

A Closer Look at the NFT Pepe the Frog Lawsuit

The text of the lawsuit and plaintiff’s claims are available via Court Listener – read them here.

Thayer’s attorney’s Holland & Hart accuse the defendants of ‘unlawful, unfair, and fraudulent business practices, which includes their unfair, deceptive, untrue, and misleading advertising and wrongful actions with respect to an auction for a particular nonfungible token (“NFT”) that led Plaintiff and others to grossly overbid on the NFT.’

It goes on to allege conspiracy on the part of Furie:

‘Defendants conspired together to facilitate and conduct an auction in October 2021 of a purportedly “rare” and “unique” NFT by using Furie’s name and reputation to widely advertise the auction.’

‘Defendants further conspired and committed wrongful conduct by engaging in a scheme to artificially inflate the value of the Pepe NFTs by which they advertised the auctioned NFT as the only one of the existing 100 that would be auctioned—promising that the remaining 99 would be withheld from circulation indefinitely—in order to increase the bid amount, even though they fully intended to distribute 46 identical NFTs for free almost immediately after the close of the October 2021 auction.’

‘As a result of Defendants’ conspiracy and wrongful conduct, Plaintiff suffered damages in the amount of more than $507,084.00 when the value of the NFT he purchased from the auction for $537,084.00 plunged to less than $30,000.00 upon Defendants’ disbursement of 46 identical Pepe NFTs for free.’

In a general allegations section, Furie’s background history of creating Pepe the Frog and its associated slogans, are also mentioned in the court documents.

NFT Pepe the Frog Lawsuit

Text from the Pepe lawsuit

‘Upon information and belief, Furie created and debuted “Pepe the Frog” in or about 2005 as a character in Furie’s Boy’s Club web comic. Over the course of the next decade, Pepe the Frog and his catchphrase, “feels good, man,” went viral and became the subject of one of the internet’s most popular memes.’

The history of NFT Pepe the Frog art is also outlined, referencing rare Pepes, cryptoart that became popular in 2016 and culminated in a $3.6 million NFT sale of a Pepe NFT called Pepenopoulos, auctioned at Sotheby’s. One citation is the forum 4chan.

The text of the plaintiff’s claims continues on for 19 pages and is a funny read.

What this means for NFTs

Detractors of NFTs often ask how a cartoon image of a monkey, pixellated person smoking a cigarette, penguin, rock, or now Pepe the Frog’s butt can have any intrinsic value and why NFTs are so expensive.

A popular joke is that the image of an NFT could simply be right clicked and saved, and acquired by anyone. That isn’t exactly what happened in this Pepe the Frog NFT lawsuit case however, which is not likely to have any impact on the market other than being an interesting story.

The NFT market shows little sign of slowing down. Google search traffic for NFTs is still high, despite a slight downturn when Bitcoin corrected from $69,000 back to under $40,000. BTC has now stabilised after bullish news of the Fed hiking interest rates.

Retail interest in investing in NFTs, collecting them, and playing NFT games is expected to continue to rise in 2022 as the new emerging asset class continues its bull market that kicked off in 2021.

In recent news one of the largest business deals in the NFT industry took place, the acquisition of CryptoPunks and Meebits by Yuga Labs from Larva Labs. Yuga Labs are the creators of the Bored Ape Yacht Club, the most successful NFT collection in the world, with a floor price of over 100 ETH (about $300,000) for the cheapest one.

BAYC NFT holders were also recently airdropped a new crypto called ApeCoin, which has been the top gainer on Coinmarketcap.

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Cryptoassets are a highly volatile unregulated investment product.