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 1
INTRODUCTION, NATURE OF ACTION, AND DEFENDANTS
PART 1
INTRODUCTION, NATURE OF ACTION, AND DEFENDANTS
- This is a class action lawsuit against companies caught up in the “crypto” craze. Defendants sold digital assets that were secured with an underlying promise that was never delivered. The assets did not have characteristics, uses, or benefits Defendants advertised and promoted. Either through reckless incompetence or greed, Defendants failed to deliver what they promised in exchange for purchasing their digital assets and abandoned their crypto project while retaining over $25 million used to fund the project.
- Defendants jointly created and marketed the “DGFamily”—a digital asset project based off Dolce & Gabbana’s brand popularity—which was used to sell digital assets that would supposedly secure a set of benefits. Such benefits were allegedly “high value” and supposed to be delivered “over an extended period of time” of two years at a rate of once per quarter. The benefits of buying Defendants’ digital assets were promoted as including a combination of eight either: (i) digital wearables (digital outfits available for use in a metaverse application called Decentraland), (ii) physical clothing from Dolce & Gabbana, and/or (iii) live events that purchasers of multiple boxes could attend. The digital assets at issue are Non-Fungible Tokens (“NFTs”), as discussed below—a form of digital assets that can be purchased, sold, and transferred on other cryptocurrency markets, such as the Ethereum blockchain here.
- Ultimately, Defendants failed to provide the complete set of benefits they promised Plaintiff, and all others similarly situated, and are liable for failing to deliver the benefits it promised its secured customers. Defendants never provided a complete set of products Plaintiff secured through his purchases of digital assets, despite repeatedly promising him the products would be delivered, while inevitably continuing to push back the delivery date.
- Defendants misrepresented the status of their NFT project to cajole Plaintiff, its investors, and the public into investing into DGFamily and then failed to ever provide a complete set of benefits as promised, failed to support the DGFamily community as promised, and manipulated the initial and resale markets for the digital assets they sold.
- This action is brought on behalf of a class consisting of all persons and entities who purchased digital assets from Defendants’ NFT project (“DGFamily Products”) from April 24, 2022, or the initial transfer of DGFamily Products, whichever date is earlier, through the original filing date of this suit, inclusive (the “Class”). The Class comprises three subclasses: (1) all persons and entities who purchased DGFamily Products directly from Defendants, or the platform Defendants used for sale, on their public release date; (2) all persons and entities who purchased DGFamily Products directly from Defendants during the class period; and (3) all persons and entities who purchased DGFamily Products on the open market during the class period as a result of Defendants’ successfully soliciting DGFamily Products. This action seeks to recover damages for Plaintiff and proposed Class members’ claims, which are brought under common law, state consumer statutes, and violations of federal law, including federal securities laws under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder by SEC, against Defendants.
- Defendants never had a right to solicit investments from the public related to DGFamily Products. The DGFamily Products were created to serve as a fraudulent vehicle solely to enrich Defendants’ founders, promoters, managers, and affiliates. Without Defendants’ fraudulent conduct and misrepresentations, DGFamily Products could not have been offered and sold to investors at any price.
- Defendants promoted DGFamily Products online as a “a slate of digital, physical, and experiential benefits.” This led to thousands of people purchasing said fraudulent security products. Defendants also manipulated the price of DGFamily Products by using their investors to buy DGFamily Products to illegally drive up their price—before Defendants still failed to deliver 75% of what they promised.
- The complete set of benefits promised in exchange for purchasing DGFamily Products were never released. Defendants manipulated the digital currency market for DGFamily Products to their advantage by executing a “rug pull,” which is a colloquial term used to describe a scheme in which an NFT developer solicits funds from prospective NFT purchasers promising them certain benefits. Once the purchasers’ funds are used to purchase the NFTs, the developers abruptly abandon the project and fail to deliver the promised benefits all while fraudulently retaining the purchasers’ funds.
- As part of Defendants’ NFT scheme, Defendants marketed DGFamily Products to purchasers by falsely claiming that, in exchange for transferring cryptocurrency to buy a DGFamily Product, purchasers would later receive benefits, including, among other things, digital rewards, physical products, and exclusive access to events, along with the support of an online ecosystem to use and market DGFamily Products. After selling their DGFamily Products, Defendants, transferred millions of dollars’ worth of purchasers’ cryptocurrency to, among other places, wallets controlled by Defendants.
- Defendants’ unlawful solicitations, offers, and sales of unregistered securities as DGFamily Products are violations of the Securities Act of 1933. Defendants’ public offer and sale of DGFamily Products was an unlawful offering of unregistered securities for which no exemption from registration was available under the Securities Act.
- The public sale of DGFamily Products was a clear offer and sale of securities because, among other things, Defendants touted, and Plaintiff and other purchasers were conditioned to expect, and did reasonably expect, that the holder of DGFamily Products would receive more than the Ethereum (ETH) or other virtual currencies invested.
- The Securities Act’s registration requirements are designed to protect investors by ensuring they are provided adequate information on which to base their investment decisions. Without registration, issuers of securities may market their securities with no disclosure requirements whatsoever. For example, an issuer could omit any information that would make a potential investor think twice before investing (e.g., conflicts of interest or major setbacks to core product lines), peddle its securities using unbounded exaggerations regarding the progress of its product development and business plan, or even fabricate the existence of merchandise drops supporting the digital products, as was the case here.
- Defendants’ false and materially misleading statements appeared in press releases, their websites, online chat rooms or forums, white papers, postings on social media websites such as Twitter, promotional videos posted on websites such as YouTube, internet podcast interviews and other materials relating to Defendants or DGFamily Products, which were disseminated widely to the investing public.
- Each of Defendants’ misrepresentations and omissions were material because they were designed to, and did, entice the public into purchasing unregistered securities (DGFamily Products) which were barely more than a vehicle for the Defendants’ enrichment. As detailed below, when the magnitude of Defendants’ failure to provide the benefits promised and support the project were revealed, the trading price of DGFamily Products plummeted.
- Plaintiff and others similarly situated deserve redress from Defendants for their fraudulently promoting and selling products that did not provide the return on investment advertised, failing to support the DGFamily project, and manipulating the price of the DGFamily Products. Defendants operated this fraudulent venture to exploit and steal from Plaintiff and other customers who trusted Defendants’ false representations. As a result, Defendants defrauded Plaintiff and thousands of other consumers, and unjustly enriched themselves by profiting off Plaintiff and others without delivering on their promises.
- Today, investors in DGFamily Products have little to show for their investments. For these reasons, Plaintiff on behalf of themselves, and all similarly situated investors, seeks compensatory, injunctive, and rescissory relief, providing rescission and repayment of all investments made to buy DGFamily Products during the class period, and the right to secure and conserve such funds until repayment.
- Defendant Dolce & Gabbana USA Inc. (“Dolce & Gabbana”) is a Delaware corporation with its principal place of business at 546 5th Ave, New York City, New York 10036- 5000. It does not have a registered agent listed, and instead lists its CEO Alfonso Dolce as the agent for service, to be served at 546 5th Ave, New York City, New York 10036-5000. Dolce & Gabbana is an international renowned fashion company that is alleged to have joined into a cryptocurrency related scam with the other Defendant, UNXD. - Defendant UNXD, Inc. (“UNXD”) is a business entity organized and existing under the laws of Dubai in the United Arab Emirates, and, during the relevant period, participated in the scheme with the other Defendants to defraud Plaintiff and all others similarly situated. Said Defendant was conducting business with the intent for the international distribution and sales of its products into the United States and the State of New York. Its address is Office no. 409, Floor 4, Building 9, Dubai Design District, Dubai, United Arab Emirates. UNXD is alleged to have worked with the other Defendants to perpetuate the scam warranting this lawsuit. The United Arab Emirates is not a party to the Hague Convention and service will need to be carried out by an agent.
- Defendant Bluebear Italia S.R.L d/b/a inBetweeners (“inBetweeners”) is a business entity organized and existing under the laws of Italy, and, during the relevant period, participated in the scheme with the other Defendants to defraud Plaintiff and all others similarly situated. Said Defendant was conducting business with the intent for the international distribution and sales of Case 1:24-cv-03807 Document 1 Filed 05/16/24 Page 13 of 51 PLAINTIFF’S CLASS ACTION COMPLAINT PAGE 14 OF 51 its products into the United States and the State of New York. Their address is: Corso Monforte 7, 20122 Milano, Italy. 38. Italy is a party to the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters. Service under the Hague Convention is affected through Italy’s Central Authority for the Hague Service Convention, the Organe national italien de la Conférence de La Haye de d.i.p. p/a Ministero degli Affari Esteri e della Cooperazione Internazionale, Servizio per gli Affari giuridici, del Contenzioso e dei Trattati, Piazzale della Farnesina, 1, 00135 Rome, Italy. The required documents (two sets): the original English version of Plaintiffs Original Petition and a translation of all documents to be served.
- Under New York Business Corporation Law § 307, the secretary of state is designated as the agent for service of process in New York for Defendants inBetweeners and UNXD because said foreign Defendants are nonresidents who engage in business in New York, but do not maintain a regular place of business in New York, nor have they designated an agent for service of process.
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