Nike Faces Lawsuit Over RTFKT Shutdown: Investors Allege Millions Lost in NFT Value Plunge

Nike Embroiled in Legal Battle Following RTFKT Closure

Global sportswear giant Nike is facing significant legal challenges following the closure of its Web3 subsidiary, RTFKT. A class action lawsuit has been filed by disgruntled investors who claim they suffered substantial financial losses due to the abrupt shutdown and the subsequent crash in the value of Nike-branded Non-Fungible Tokens (NFTs).

The lawsuit alleges that Nike’s actions effectively rendered valuable digital assets worthless, leaving investors millions of dollars out of pocket. This case highlights the volatile nature of the NFT market and the potential risks associated with corporate ventures into the Web3 space.

Key Allegations in the Class Action Lawsuit

Investors are taking Nike to court, seeking damages exceeding $5 million. The core arguments presented in the lawsuit include:

• Promotion of Unregistered Securities: The plaintiffs argue that the NFTs sold under the Nike and RTFKT brands should have been registered as securities. They claim Nike failed to do this, misleading investors about the nature of their purchase.
• Misleading Marketing Practices: The lawsuit contends that Nike leveraged its powerful brand recognition and marketing prowess to inflate the perceived value and future potential of the RTFKT NFTs, encouraging investment without adequately disclosing risks.
• Abrupt Project Shutdown: The sudden closure of RTFKT operations in December 2024 is central to the case. Investors claim this unexpected move directly caused the value of their NFTs to plummet, erasing significant investment value.
• Violation of Consumer Protection Laws: The legal action asserts that Nike violated consumer protection statutes across multiple states, including New York, Florida, Oregon, and California, by engaging in deceptive practices.
• Lack of Informed Consent: Investors maintain they would not have purchased the NFTs had they been aware they were potentially unregistered securities or that Nike planned to discontinue the project.

NFT Value Collapse and Market Repercussions

The shutdown of RTFKT sent shockwaves through the specific market for Nike-associated NFTs. Reports indicate a dramatic decline in the value of these digital assets on secondary marketplaces following the closure announcement.

Flagship collections, such as the popular Clone X series, were significantly impacted, with their floor prices dropping sharply. Investors argue that the value proposition, heavily tied to Nike’s continued involvement and marketing support through RTFKT, evaporated overnight with the shutdown.

This incident serves as a cautionary tale for the broader NFT community and corporations exploring Web3 initiatives. It underscores the inherent risks when the value of digital assets is closely linked to the continued operation and support of a centralized corporate entity.

Technical Troubles Add to Investor Woes

Compounding the financial losses were technical difficulties. Investors reported issues with the display of images associated with their Nike-linked NFTs, further eroding confidence and usability. In response to these problems and likely to prevent future data loss or display issues, RTFKT’s former head of technology has reportedly begun transferring the NFT metadata and associated files to a decentralized storage platform, aiming for greater permanence and resilience independent of a central server.

What’s Next?

The class action lawsuit, identified as Cheema v. Nike Inc., is currently proceeding through the legal system. Its outcome could have significant implications for how corporations engage with NFT technology and the legal classification of digital assets offered by major brands. As the case unfolds, it will be closely watched by investors, legal experts, and participants throughout the crypto and Web3 industries.