Snoop Dogg, his ape and a question of celebrity hype

CNN

Snoop Dogg's alleged love for some cartoon apes is at the heart of a federal lawsuit filed by Yuga Labs against Ryder Ripps, a trollish artist.

Yuga Labs V. Ripps is about trademarks. However, the legal filings reveal the craze that surrounded the Bored Ape Yacht Club's collection of non-fungible (NFT) tokens of cartoon apes.

After a number of celebrities claimed to have one, the Bored Apes were some of NFT's most popular NFTs. Snoop, who was not a defendant or plaintiff in the case, was one of most vocal and famous owners of an ape. Ripps's team claims that Snoop was paid by Yuga Labs for his love of apes. Federal regulations also require celebrities to disclose any paid endorsements. Ripps' attorneys filed court documents claiming Snoop received 'around 1 million dollars' for performing as a Bored Ape during the MTV Video Music Awards 2022. The rapper didn't disclose the payment along with his performance. CNN asked MTV representatives about Snoop Dogg's compensation. They did not answer.

As the fallout of the collapse of FTX revealed, celebrity-paid promotions were also part of the success in the broader crypto sector. The Securities and Exchange Commission (SEC) charged eight celebrities in March for failing to disclose that they had been paid to promote cryptocurrency. Snoop, along with other celebrities and crypto companies, is also facing a December class action lawsuit that claims he was involved in a scheme designed to artificially increase the price of Bored Apes by using inauthentic celebrity hype.

Requests for comment from the rapper's representative on this story were not answered.

In an interview with CNBC published in June of last year, he said that his interest in cryptocurrency was centered around the intellectual property (IP) rights that it brought. When asked why he was interested in crypto, he said that he wanted to be able to control and own the entire IP, and not just be a marketing tool, or someone who is an ambassador. He also said he wanted to be the owner and CEO.

The Bored Ape Craze

Ripps' Bored Apes had already become a popular trend, with celebrities and sports stars alike using them as social media profile pictures and other uses. He sold them as RR/BAYC, with a website that explained how the Bored Apes were allegedly based on racist memes from 4chan, an online troll site. Yuga Labs did not sue Ripps for defamation but rather for trademark infringement.

Yuga did not have trademarks registered, so the company had to argue before a court that consumers associated Yuga with its logos. This was done in part by pointing out the celebrities who had publicly spoken about Bored Apes.

Ripps' attorneys counter that celebrities were paid for promoting the apes, without disclosing this, and Yuga therefore has 'unclean' hands -- a principle of law that states that if apes gained their fame in an improper manner, they can't use it to assert trademark rights.

There was little direct evidence that celebrities were being paid to promote the apes. In court documents filed recently by Ripps’ lawyers, it is stated that 'Snoop created a video featuring a BAYC logo and performed at MTV Video Music Awards using a BAYC logo.' Yuga failed to disclose the cash payment it made to Snoop Dogg in exchange for his endorsements. It also did not reveal that Snoop Dogg is a Yuga shareholder. Yuga Labs told CNN previously that celebrities weren't paid to promote Bored Apes.

Guy Oseary is a Hollywood agent and Yuga board member who invested in the business. He also confirmed to CNN that the celebrities had not been paid. The Ripps filings state that Oseary said in a deposition "he believes Snoop Dogg received around $1 million as 'financial assistance to do the video ...''

Oseary has not responded to our request for comments on this topic. Yuga Labs requested that Oseary’s deposition be sealed in the Ripps Case. Ripps' attorneys admitted that they had made a mistake by not redacting the documents a few hours after posting the filings. CNN's Ripps lawyer said he couldn't comment on the matter.

Yuga Labs declined to comment publicly. Yuga Labs posted a document on Monday in which it said that Oseary’s statements were 'incomplete' and'misleading', but did not provide any contradictory statements taken from his deposition. Yuga said that the Snoop data could lead to 'unfair bias and confusion'.

John Jasnoch is a lawyer representing the plaintiffs of the separate class-action lawsuit. He has closely followed the Ripps case. Jasnoch stated that the recent filings of the Ripps lawsuit provide an insight into the interconnected financial interests among the entertainment industry, crypto venture capital and the predatory crypto venture fund.

Jasnoch noted that the amount Snoop is alleged to have received -- about $1 million -- was much higher than the money paid out to other celebrities caught for unreported crypto promotion. Kim Kardashian received $250,000 for promoting EthereumMax. The SEC fined Kim $1.26million last October because she did not disclose it. Lindsay Lohan allegedly received $10,000 for tweeting about Tronix tokens. The SEC fined her more than $40,000 in March after charging her with illegally promoting it without disclosure. Paul Pierce, a former NBA player, was paid $244,000 for promoting EthereumMax. In February, he agreed that he would pay $1.4million to not disclose it.

Failure to disclose

Gary Gensler, SEC chair, said in a press release on the Pierce fine that 'this case is another reminder for celebrities: the law requires you disclose to the public who and how much you're getting paid to promote investments in securities and you cannot lie to investors about a security.

Snoop Broadus' real name is Calvin Broadus. There are no indications that he is under investigation by the federal government or is facing any allegations of wrongdoing. SEC responded to CNN's question about whether Snoop Dogg is under investigation by saying that they would not comment. The FTC would also not comment on any specific case. A spokesperson for the FTC said that, in general, "if there is a connection between a marketer and an endorser that consumers wouldn't expect, and that would affect how consumers judge the endorsement, then that connection should be revealed."

The government does not consider shilling crypto the same as shilling shoes or makeup. The SEC has declared cryptocurrency to be a security, an investment product requiring more disclosures by an endorser. The SEC is yet to decide whether NFTs - unique digital files purchased and sold using crypto - are securities. Ripps' team claims they are. At least one federal judge has recently ruled that NFTs, depending on the way they are traded, can be securities. Yuga claims they are not.

The SEC's requirement that NFT issuers make disclosures could also have serious consequences for people who are trying to make quick money on the internet. Molly White, Harvard Fellow and critic of the crypto-industry, told CNN that some companies operated on a "greater fools" strategy, which meant they were trying to gain profit by selling their crypto products to a larger and larger audience. Iconic celebrities attracted the largest audience.

Snoop could be liable for damages

Snoop and Eminem transform into their Bored Apes in their hybrid live/video performance at the VMAs. They rap about smoking pot and being rich. Snoop didn't say that he was compensated, but Yuga claimed in court documents Yuga appeared in the credits at the end of the award show broadcast.

Charles Whitehead is a professor at Cornell Law School who specializes in business law. He says that when determining whether Snoop might be in trouble with the regulatory authorities, there are some questions to ask. If Snoop gets paid to promote NFTs, the first question you would have to ask is, in terms of securities law, is this a security? If yes, and in the majority of these cases the SEC's position was yes, then the next question is: Is he in any way conditioning interest in investments in securities?

Snoop being paid to say that he invested in Bored Apes and that they are really cool would be a violation of both federal and state law. Whitehead stated that Snoop must disclose the fact that this sponsorship is paid and how much he gets paid.

Whitehead stated that dancing as a Bored Ape and not talking about the investment 'looks less like an endorsement' and 'looks less like you're promoting it'. He said that this would not raise any issues with the SEC or FTC. You can get paid for performing in a logo. Wells Fargo could have a wooden wagon that you can ride on MTV's stage.

There's another layer to this. What if, after promoting an investment through social media -- like Snoop throughout 2022 did -- you are only paid to dance in the logo of that investment in a video. "Paid for video, but not paid tweets?" Whitehead replied, "I mean, wink wink wink nudge, wink wink." If the contract states that I am only paid for the video, but the reality is I'm getting paid to promote the security -- it's too bad. You can't get around the law so easily.

The overlap of lawsuits provides a window to the overlapping interest of those involved. Snoop tweeted an image of his Bored Ape and thanked MoonPay. MoonPay is a crypto payment firm that claims its 'concierge services' allow wealthy people to purchase NFTs without having to set up a cryptocurrency wallet. Snoop made his first investment in Yuga Labs in March 2022. A month later, he made another in MoonPay. In court documents, Ripps' attorneys also claim that Snoop invested in Sound Ventures. This is the VC company of Guy Oseary who was on Yuga’s board. Sound Ventures made investments in Yuga, MoonPay and other companies. MoonPay invested in Yuga as well. MoonPay has a crypto wallet that spent $15,000,000 on Bored Apes.

According to Yuga Labs, Eminem transforms into a white ape in a "hip hop outfit" while Snoop is transformed into a cheetah fur ape with a "pimp jacket." Eminem sang, "I used to be penniless. Now I'm rich." The sh*t doesn't make sense.