Key takeaways from the Plaintiff's Class Action Complaint vs. DOLCE & GABBANA USA INC., a Delaware Corporation, UNXD, INC., a Dubai Corporation, BLUEBEAR ITALIA S.R.L. d/b/a INBETWEENERS, an Italian Corporation
PART 2
FACTUAL ALLEGATIONS
PART 2
FACTUAL ALLEGATIONS
- The alleged NFT scheme was not Defendants Dolce & Gabbana and UNXD’s first joint venture in the crypto space. In August 2021, Defendant Dolce & Gabbana launched their first NFT collection, “Collezione Genesi” in collaboration with Defendant UNDX. Defendants’ NFT collection sold out relatively quickly for a total of $5.7 million. The largest customers included people and entities known as “Pranksy, Seedphrase, Red DAO, and Boson Protocol.” All but Boson Protocol were investors in UNXD.
- The success of the “Collezione Genesi” project led Defendants to collaborate on another cryptocurrency project—which is the scheme at issue. On February 20, 2022, UNXD announced the launch of DGFamily Products on Discord, before announcing a collaboration with another fashion company, Valentino.
- The next month, UNXD announced a $4M raise from “some of the most notable investors in the ecosystem,” while in April it announced a collaboration with Pranksy (without revealing he’s an investor in UNXD).
- That same month, on April 18, 2022, UNXD promoted yet another collaboration with Dolce & Gabbana, this time also including another crypto entity, Defendant inBetweeners— before UNXD had even released the DGFamily Products. UNXD then appeared to go back to focusing on DGFamily Products, as shown via a Twitter announcement on April 22, “[w]e’ll soon reveal some of the very special collectors, builders, and investors that are participating in the exclusive Platinum Box private sale for the UNXD x @DolceGabbana DGFamily collection, priced at 40 ETH. An incredible array of 50+ people that we respect and admire.” ETH, a widely used digital currency, was worth around $3,000 from April 22 to April 24, 2022, which made the price for a Platinum Box around $120,000.
- Two days later, on April 24, 2022, Defendants Dolce & Gabbana and UNXD began selling their DGFamily Products for at least 1.224 ETH, which bought a Glass Box, or a maximum of 40 ETH for a Platinum Box. The Glass Box was intended to be “revealable” on a certain date, which would transform it into a Black Box (lowest tier rewards/same as unrevealed Glass), a Gold Box (middle tier rewards), or a Platinum Box (highest tier rewards).
- Despite selling all 5,000 units, only some of the DGFamily digital assets were delivered to their customers/investors that day. Defendants Dolce & Gabbana and UNXD failed to deliver the NFTs to all the owners of the 5,000 boxes who attempted to activate (or “mint”) said boxes on the date promised.
- It later emerged their failure to deliver was because they had not built a smart contract to distribute DGFamily Products after each box was activated, or “minted,” but instead transferred the DGFamily Products out one at a time. Despite the inefficiency of this process, noted by the community, and Defendants Dolce & Gabbana and UNXD’s promise to support their community, UNXD continued with that inefficient process until April 26. At that point, UNXD finally stopped sending each out on a one-by-one and began sending rewards out in batches— though the process was still not automated.
- On April 29, 2022, after the initial process struggles, UNXD tweeted a rough timeline for the project that included the following deadlines: ~2 weeks (May 13-ish): glass box reveal ~2 weeks after that (May 27-ish) Disco Drip drop of metaverse wearables ~2 weeks after that (June 10-ish): “a capsule collection of digital+physical pieces designed by Domenico Dolce and Stefano Gabbana. T-shirts, hoodies, and sneakers not available anywhere else. You can trade the NFT before redemption. There will be a burn + replace mechanism.
- Despite such promises, Defendants Dolce & Gabbana and UNXD again failed to deliver. On May 16, UNXD held a virtual town hall with DGFamily Product customers/holders/investorsto discuss Defendants’ failure to deliver the box reveal to all investors. Defendants Dolce & Gabbana and UNXD then began using looser language regarding the date of the first event—saying they “expected to start [revealing the boxes] on Saturday, May 21st.” On May 20, Defendants Dolce & Gabbana and UNXD announced the first set of in-person events and extended invitations to investors of a certain status—exciting investors.
- That excitement quickly waned when the DGFamily Products’ capabilities were not enabled until May 27, 2022, which was, though previously unknown to investors, a day after Defendants Dolce & Gabbana and UNXD’s NFTs were finally accepted onto the marketplace. UNXD blamed that delay on a critical bug that would allegedly allow technical minded people to see the potential value of each unrevealed box—instead of its and Dolce & Gabbana’s own failures.
- With investor discontent already brewing, UNXD announced the first of the eight benefits, or the first drop, on June 10, 2022, which was 13 days after they had originally promised to release it. The first drop finally released on June 17, about 20 days overdue and consisted of digital outfits that could be used only in a metaverse platform with barely any users, called DecentraLand.
- Yet the first drops were not even usable in DecentraLand until 11 days later as Defendants Dolce & Gabbana and UNXD had failed to get approval from DecentraLand’s management before releasing said drops. Defendants Dolce & Gabbana and UNXD did not ensure these products were usable before distribution. When customers complained to Defendant Dolce & Gabbana, its employee responded with a generic email: .
- The second drop occurred on July 30, 2022, when Defendants Dolce & Gabbana and UNXD sent passes to order Dolce & Gabbana clothing to investors—around 50 days overdue. One of the original and largest investors, Seedphrase, is placed in charge of marketing that is paid at an unknown pay structure. -
- Generously estimating the value of the drops, each drop sells for around $20-$30. Each investor was given 2 out of 8 secured items, making the two drops a DGFamily Product holder worth around $50 based on an around $3,600 investment. Though some investors with multiple DGFamily Products got additional pieces, the pieces were not valued much higher than any other drop and did not fulfill the project’s obligations.
- Continuing to feel the pressure, on August 3, 2022, UNXD scrub their old notes and guidance online and switch tact. Trying to restore their consumers’ confidence, Defendants Dolce & Gabbana and UNXD encouraged their community to buy more DGFamily Products as, “[they had] more big things coming.”
- As of October 1, 2022, the value of DGFamily Products on a secondary market was once again very poor. Total value accrued from one box minted for around $3,600 currently stands at around $200 with Drops 1 and 2 combined.
- On December 8, 2022, Defendants UNXD and Dolce & Gabbana announced Defendant inBetweeners—who previously produced a project currently under intense scrutiny for scamming one of its own holders—would help with the project.
- At the next release, because the project was publicly failing, inBetweeners began to buy their own assets on the secondary to create false volume (presumably) to entice people to buy.
- On January 25, 2023, UNXD pledged to hold one Town Hall per month, after investors complained that Defendants had been avoiding the community for months at a time.
- On February 21, 2023, UNXD marketed “Project ID”—which they described as a profile picture project which will revolutionize Web3, a blockchain based system. One week later, UNXD announced “Messana”—the new name for Project ID—and stated, the “Realtà Parallela collection will begin shipping in early April,”—a full 8 months after it was promised.
- Attempting to follow through, on March 11, 2023, March 12 was announced as the last day for the community to send in designs for a third drop, entitled “Future Rewind” (FR). FR was another digital drop like the first drop, but the designs were supposed to be created by the community. Winners were announced March 31.
- On April 4, 2023, inBetweeners attempted to charge hidden fees to Defendants’ investors/customers, and UNXD announced that Dolce & Gabbana would be covering the cost. That was arguably the only positive move made on that project in 18 months, and it was merely worth 10 Euros to each holder.
- By April 27, 2023, the Realtà Parallela drop had still not shipped out, despite early April being the deadline. UNXD claimed all production has been completed and shipping has been running for two weeks, despite most investors/customers denying they have received anything.
- Defendants had failed to respond to its investors/customers’ concerns and fulfill their obligations to Plaintiff and those similarly situated. On May 19, 2023, UNXD announced, in contravention to its earlier statement, that Realtà Parallela drops were “arriving around the world.” Many investors/customers still denied ever receiving their Realtà Parallela drops. Those holders were advised to contact Dolce & Gabbana to resolve any issues via email, and said emails were ignored for many months.
- The last substantive update from Defendants occurred on June 5, 2023. UNXD reassured Defendants’ investors/customers that sneakers were being shipping out—despite most investors/customers still denying that they received them. Those who were fortunate enough to receive the drop sometimes encountered issues with having to pay triple digit bills in USD for duties/custom charges, though Defendants claimed they would cover these costs. It’s unknown how many people have been successful with reclaiming this money, but this was another example of Defendants ignoring communications. Defendants’ scheme caused damages to Plaintiff and other consumers. Defendants knew consumers like Plaintiff would be convinced to buy their products by Defendants’ false representations of providing eight drops of different products.
- On information and belief, Defendants made the business decision to forgo an expensive and time-consuming process to complete the DGFamily project or support it, and instead deliberately undertook a scheme to defraud Plaintiff and other consumers. Defendants admitted the project has regrettable elements and a refund is unfeasible:
- On information and belief, Defendants manipulated the DGFamily Product market. Their standard operating procedure has been to promise products they fail to deliver, before abandoning a project and community they promised to support. Because of these unconscionable practices, Defendants should disgorge any revenue, profits, or any other gains from their scheme to Plaintiff.
- Defendants knew or should have known that they were falsely advertising a nonfunctional product and that consumers would be deceived by their false representations. Defendants acted with reckless disregard when they made such false representations and are responsible for Plaintiff’s damages.