Nike was under the fire after a group of investors filed a class acting lawsuit, accusing the giant sportswear that brings massive financial losses by shutting down RTFKT, the web3-focused subsidiary obtained in 2021.
Investors claim Nike's actions led to a sharp collapse in the value of Nike-Branded NFTS, which wiped millions of investments.
According to the court documentsNike allegedly “rugpulled” the community by closing RTFKT and cutting demand for associated digital assets.
The plaintiffs argue that Nike used its brand and marketing expertise to advance what they described as unregistered security before the project suddenly turned away.
The lawsuit claimed Nike to capitalize on the crypto boom to drive NFT sales. Investors bought NFTs hoping they would increase in value, thanks to Nike's promotional efforts.
However, once the RTFKT was dissolved, these incentives disappeared. Consumers who sometimes expect exclusive rewards and earning resales have seen their investments losing value almost immediately.
“Because the Nike NFTs got their value from the success of a given advocate and project – here, Nike and its marketing efforts – investors bought digital possession with hopes that its value will increase in the future as the project grows in popularity based on the Nike brand,” the lawsuit Nakasa said.
The complaint highlighted the promises of completing adventures, unlocking limited edition products, and opportunities for secondary sales are major motivations for buying NFTs.
With the collapse of RTFKT operations, these incentives evaporated, leaving investors worthless digital assets.
Adding to their argument, plaintiff insists that the Nike NFTs qualify as security under the federal law. They claim that Nike failed to register digital assets with the US Securities and Exchange Commission (SEC) or reveal associated risks.
Investors argue that they cannot buy digital assets at rising prices if they know the real risks.
“The Plaintiff and others have never bought the Nike NFT at the prices they have made, or at all, they know that Nike NFTs are not registered security or that Nike will cause the rug to pull from under them,” investors argued.
The plaintiffs are looking for a jury test and injury of over $ 5 million for alleged violations of consumer protection laws in New York, California, Florida, and Oregon.
RTFKT is suffering from technical glitches
Meanwhile, this lawsuit arrived as investor failures were further strengthened on April 24 when technical issues prevented images linked to Nike from display.
RTFKT's technology leader, Samuel Cardillo, explained that the flow resulting from a cloudflare contract that ends earlier than expected.
“Beginning in April, the decision to stay in Cloudflare Free was (finally) approved and I started the task to move the infrastructure. Somehow CloudFlare decided to move on to free plan a few days before the contract also ended the bug with the bug where Cloudflare refused to stream images and videos,” Cardillolo, “Cardillolo Explained.
While most of the images have since restored, Cardillo is now moving RTFKT's NFT files on Arweave's decentral storage platform using AR drive. This step aims to protect NFT holders from similar future outages.
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