Dapper Labs settles NBA Top Shot Moments lawsuit for $4 million

Dapper Labs, the creator of the once highly-popular NBA Top Shot Moments NFT collection, announced on Monday it had settled a class-action lawsuit alleging the company violated securities laws by improperly selling the digital collectibles.

According to a court document provided by Dapper Labs, the company agreed to settle the lawsuit for $4 million. The money will be allocated to a settlement fund which will be made available to qualifying claimants, the document also said.

"The settlement in the Friel vs. Dapper Labs case further asserts Dapper Labs’ conviction that NBA Top Shot Moments are not securities under federal law," the Dapper Labs said in a statement.

Dapper Labs successfully settling the case represents a bit of a twist considering last year the judge overseeing the case found that NBA Top Shot Moments NFTs had met the requirements to be considered a security, therefore allowing the Friel vs. Dapper Labs lawsuit to proceed. 

The lawsuit's plaintiffs alleged that Dapper Labs made hundreds of millions of dollars in profit by selling unregistered securities while artificially “propping up the market" for its NFTs. They also accused Dapper Labs of "preventing users from withdrawing their money for months on end," according to a report in The Verge .

The case was originally filed with the U.S. District Court for the Southern District of New York in 2021.

CEO vindicated

Dapper Labs's co-founder and CEO Roham Gharegozlou, who was named as a co-defendant in the lawsuit alongside his company, appeared vindicated by the settlement. "We are pleased with the results of today’s settlement, which marks a significant step forward for Dapper Labs and the Flow community," he said in a statement. 

NBA Top Shot NFTs are minted on the Flow blockchain, which was created by Dapper Labs.

The company pointed out in its statement that since March 2022, there have been four "additional" marketplaces "authorized to display and sell NBA Top Shot Moments," Dapper Labs said in its statement. "This expansion allows collectors more flexibility and opportunities to trade and enjoy their Moments, fully supported by the NBA and the NBA Players Association," Dapper Labs also said.

Monthly trading volumes for NBA Top Shot NFTs peaked at $226 million in February 2021, according to CryptoSlam data. Like most other top-tier NFT collections, trading volumes have since declined significantly for NBA Top Shots.