The decision by fashion giant Nike to sunset RTFKT a few months back did not sit well with some investors who are now teaming up to sue the firm for $5 million.
Nike, one of the biggest and most famous sportswear and athletic brands in the world, is under fire. Investors have accused the company of misleading them with non-fungible tokens (NFTs) tied to its brand.
A recently filed lawsuit claimed Nike’s actions left buyers with worthless digital assets after its NFT subsidiary, RTFKT, suddenly shut down earlier this year.
Nike Accused of Rug Pull Over NFT Project
Last Friday, a group of investors filed a class action lawsuit against Nike. They are asking for more than $5 million. In the lawsuit, they say Nike used its famous brand to promote and sell NFTs through RTFKT.
The plaintiffs claimed the NFTs were unregistered securities prohibited from being sold without following special rules. They also said the digital collectibles were designed to be traded in the secondary market.
The lawsuit against the firm over its RTFKT NFT shows the growing confusion about how NFTs should be treated under the law. The U.S. Securities and Exchange Commission (SEC) has been cracking down on NFTs, tagging them as “crypto asset securities.”
However, not everyone at the agency agrees with this approach. Last September, two commissioners, Hester Peirce and Mark Uyeda, argued that just because a buyer hopes to profit from an NFT does not mean the NFT is a security.
Furthermore, the investors claimed they were led to believe the NFTs had lasting value and strong backing. Instead, RTFKT shut down operations in January, and the value of the NFTs dropped sharply. Many investors said they would not have bought them if they knew this would happen.
Nike bought RTFKT, a fast-growing NFT company, in late 2021 to expand its business into digital products. However, in December 2024, RTFKT announced it would close down operations by the end of January 2025. This news shocked investors who had spent much money on the NFTs and trusted Nike to keep the project going.
Last week, some digital art disappeared from the internet briefly, making investors even more upset. RTFKT’s head of technology, Samuel Cardillo, blamed Cloudflare, a cloud service provider, for the problem.
Nike Also Accused of Breaking Consumer Laws
The recent lawsuit centers not only on securities law but also claims Nike violated consumer protection laws in New York, California, Florida, and Oregon.
The plaintiffs asserted that the fashion giant failed to protect its customers by shutting down RTFKT and leaving NFT buyers with losses. They believe big companies like Nike should not leave their customers without support.
The case raises serious questions about how companies like Nike handle digital assets. It shows how risky buying NFTs can be when companies stop caring for the digital products they sell.
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